My husband and I are seriously considering filing bankruptcy. We are stressed to the max and at this point we don't feel we have any other options. I'm a sahm but he makes about $75,000 a year so up until this horrible economy we have been doing fine. His employer recently cut his hours because of the economy so now he doesn't make enough to even cover our bills. I have been looking for a job but we have come to the realization that a low paying job won't be enough to pull us out of this mess. We have tried to figure out ways to cut our expenses but even if we sell our 2nd vehicle and camper and drop everything to bare minimums, we still can't cover our bills. We have already cut out all luxuries such as cable, entertainment, eating out. The only luxury we have kept is our internet but we need it for work purposes. We have still been making all our payments but our credit cards are now maxed out and we have already exhausted the equity in our house, our mortgage payment was due today but we have 29 cents in our bank account so it isn't going to get paid. I would gladly sell our house if it would get us out of this but the market is so bad in our community I know it wouldn't sell. I'm just looking for any advice. Has anyone been through this recently and can give me some details about how the bankruptcy process works? Any recommendations would be helpful.

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gusti...
Jun. 1, 2008 at 11:49 PM just contact a lawyer and get started asap! once you do that the creditors will leave you alone

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marak...
Jun. 1, 2008 at 11:50 PM

 Bankrupsy laws were changed by dubya. Here is a list of things you need to know:

 

The New Bankruptcy Law

Here are some of the major changes you should know about.

Now that the new bankruptcy law is in effect, the landscape has changed for those who are considering bankruptcy. Some filers with higher incomes won't be allowed to use Chapter 7, but will instead have to repay at least some of their debt under Chapter 13. All debtors will have to get credit counseling before they can file a bankruptcy case -- and additional counseling on budgeting and debt management before their debts can be wiped out. And, because the law imposes new requirements on lawyers, it may be tougher to find an attorney to represent you in a bankruptcy case.

Here are some of the most important changes.

Restricted Eligibility for Chapter 7

Under the old rules, most filers could choose the type of bankruptcy that seemed best for them -- and most chose Chapter 7 (liquidation) over Chapter 13 (repayment). The new law will prohibit some filers with higher incomes from using Chapter 7.

How High is Your Income?

Under the new rules, the first step in figuring out whether you can file for Chapter 7 is to measure your "current monthly income" against the median income for a household of your size in your state. If your income is less than or equal to the median, you can file for Chapter 7. If it is more than the median, however, you must pass "the means test" -- another requirement of the new law -- in order to file for Chapter 7.

The Means Test

The purpose of the means test is to figure out whether you have enough disposable income, after subtracting certain allowed expenses and required debt payments, to make payments on a Chapter 13 plan. To find out whether you pass the means test, you subtract certain allowed expenses and debt payments from your current monthly income. If the income that's left over after these calculations is below a certain amount, you can file for Chapter 7.

For more detailed information on these calculations and an online calculator that will do the math for you, see www.legalconsumer.com, created by Albin Renauer, author of Nolo's book How to File for Chapter 7 Bankruptcy.


Counseling Requirements

Before you can file for bankruptcy under either Chapter 7 or Chapter 13, you must complete credit counseling with an agency approved by the United States Trustee's office. (To find an approved agency in your area, go to the Trustee's website, www.usdoj.gov/ust, and click "Credit Counseling and Debtor Education.") The purpose of this counseling is to give you an idea of whether you really need to file for bankruptcy or whether an informal repayment plan would get you back on your economic feet.

Counseling is required even if it's obvious that a repayment plan isn't feasible or you are facing debts that you find unfair and don't want to pay. You are required only to participate, not to go along with any repayment plan the agency proposes. However, if the agency does come up with a repayment plan, you will have to submit it to the court, along with a certificate showing that you completed the counseling, before you can file for bankruptcy.

Toward the end of your bankruptcy case, you'll have to attend another counseling session, this time to learn personal financial management. Only after you submit proof to the court that you fulfilled this requirement can you get a bankruptcy discharge wiping out your debts. (The website above also lists approved debt counselors.)

Lawyers May Be Harder to Find -- and More Expensive

As you can see, the new law adds some complicated requirements to the field of bankruptcy. This makes it more expensive -- and time-consuming -- for lawyers to represent clients in bankruptcy cases, which means attorney fees have gone up.

The new law also imposes some additional requirements on lawyers, chief among them that the lawyer must personally vouch for the accuracy of all of the information their clients provide them. This means attorneys have to spend more time on bankruptcy cases, and charge their clients accordingly. This combination of new requirements have driven some bankruptcy lawyers out of the field altogether.

Some Chapter 13 Filers Will Have to Live on Less

Under the old rules, people who filed under Chapter 13 had to devote all of their disposable income -- what they had left after paying their actual living expenses -- to their repayment plan. The new law adds a wrinkle to this equation: Although Chapter 13 filers still have to hand over all of their disposable income, they have to calculate their disposable income using allowed expense amounts dictated by the IRS -- not their actual expenses -- if their income is higher than the median in their state. And these allowed expense amounts must be subtracted not from the filer's actual earnings each month, but from the filer's average income during the six months before filing.

Other Changes

There are other changes that can affect bankruptcy filers negatively, including how property is valued (at replacement cost instead of auction value) -- this means more debtors are at risk of having their property taken and sold by the trustee -- and how long a filer must live in a state to use that state's exemption laws (this can make a big difference in the amount of property a bankruptcy filer gets to hold on to). These changes and others are explained in The New Bankruptcy: Will It Work for You?, by Attorney Stephen Elias (Nolo).

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vtownmom
Jun. 2, 2008 at 12:00 AM

believe me you arent the only ones in this hell hole... financial setback.  instead of filing bankruptsy we opted for consolidation thru a debt company money management international (moneymanagement.org) this is our SECOND time doing this (thats the way of life to get yourself in debt whether you plan to or not) and i'm 2 months behind paying them.

call your mortgage lender make arrangements with them ... there are other organizations out there that may be able to help. Check with HUD

anyways if you don't plan on moving anytime soon... and you dont think your credit  score will be needed in the next 10 years than go for bankruptsy... at least most of the credit cards debts will go away, you'll just have to pay cash...you have to pay for a lawyer to file the paperwork then go to a court hearing. my aunt filed bankruptsy about 3 months ago...she doesnt have a house or kids so thats why she did it.

our situation... we don't want our credit score to be bad for 10 years ... the debt consolidation does have a negative affect on the score but not as long (maybe 2 years) but at least you've paid off your obligations.  our credit score is in the 500's but because we arent able to refinance or even sell our house either this was the best way for us.

look into both ... talk with your husband  it really depends on what you plan on in the future. Good luck!!!

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mommy...
Jun. 2, 2008 at 11:11 AM we should all hang Bush and the Oil Tycoons....Bush and his crooneys keep getting richer while the rest of us keep getting poorer, I know where you are, I fortunetly don't own a home, so it was easier to downsize, I now live in a 2 bedroom with 3 kids, me and my husband. And we live kinda in the ghetto. But it was the only way we could keep a roof over our heads, my middle son is special needs and the extra cost in that in it's self is crazy...I can not go to work as having 2 children in daycare, 1 of which would need to have a full time nurse on staff, is not going to happen, not with me making $14 an hour. Plus finding an employer to be empythetic to my situation and allowing me time off at a moments notice because my son is sick isn't going to happen either.  So we just keep praying we can hold our head above water 1 more year, because hopefully whoever takes office next can start to pick up the pieces again.

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lovem...
Jun. 3, 2008 at 1:23 AM May I recommend daveramsey.com

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maine...
Jun. 3, 2008 at 7:10 AM

Just had my final meeting with the trustee for my bankruptcy yesterday.

It's tough, it sucks and it's humiliating (emotionally)...especially when you've tried so hard and there's just nothing you can do because the economy is in the toilet and is not ALLOWING you to meet your obligations.

I will say this, however, it wasn't HALF as hard to get a full discharge (chapter 7) as the laws make it out. A simple review of income coming in vs. expenditures and a lawyer can tell you right off if you qualify for a full discharge or a chapter 13. 

There's alot of choices that you have to make. Like keeping your house (or not), cars, etc. You have to have a list of ALL assets (clothing/furniture/vehicles/antiques) etc. and what they would be worth at yardsale values.

I tried to sell my home first, but the market just went to crap so that was completely out. Yup, we'll be losing the house, but we get to keep the car and all our "essentials" (stove/fridge/washer/dryer/furniture/clothes) and it'll be a black mark on the credit report for 10 years (for chapter 7 anyway), but honestly, the stress of trying to keep up with a budget that was originally set when our income was a combined $90K per year when it's now down to about $20K per year was far worse than the bankruptcy itself.

I suggest you find a lawyer and discuss the matter thouroughly with them first. Only do it if you have NO other choices....and usually, the first consultation is free so there'd be no harm in seeing what all your options are.

I wish you the best and hope that you don't have to claim bankruptcy. 

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