In the two years I was with my wife we (well, mostly she) managed to run up some considerable credit card bills and other debts. They weren’t a problem when we were making close to $100,000 a year, but I’ve been laid off and my wife left me, so now I have more debt than I can make in a year at my new job (not counting the car, which she is keeping and paying on, though it’s in both our names). I’ve considered working out arrangements for them now that I’m finally settled in and have a little positive cash flow (living with my mother helps) but when I look at the figures it seems like I will be paying a very long time.
I don’t really need a good credit rating, I hardly ever bought stuff on credit before I got married (I was making $60K a year and living in a $265/mo. apartment), and I don’t really need it now, so I think bankruptcy might be a good idea. Before I contact a lawyer, is there anything I should re-think or that I might be missing? I do know I need to work out whether to get my divorce before or after declaring, and discuss this with the future ex. My mom has some money from my Dad’s life insurance, and she is willing to help me with the legal fees, as long as they aren’t too excessive.
You should be able to find a lawyer who will talk to you without a fee unless you agree to retain that attorney. You have many possible issues, and the state where you live (assuming it’s the U.S.) will determine many things about the divorce. Like, are you in a community property state? I say get legal counsel asap.
Have you considered credit counselling? Or getting a low-interest loan to consolidate your debts? It might be smarter in the long run.
You may not need credit now, but in the future, should you decide to buy a house or a new car, you may have a tougher time getting a loan, and once you get it, you’ll pay higher interest rates with a bankruptcy on your credit history. If you declare bankruptcy before the divorce, your ex-wife’s creidt history is in jeopardy as well. When it comes to your credit rating, better safe than sorry, because you never know when you’ll need it.
Bankruptcy should be your last possible resort, after exhausting all of your other options. I’d suggest talking to your creditors, and seeing if you can work out an arrangement which will help you avoid bankruptcy if at all possible. Yes, paying off debt is long and tedious, but having been in a similar situation, I know it’ll pay off in the long run. A relative of mine who filed bankruptcy years ago is still suffering the repercussions, and wishes she hadn’t done it.
It is an easy way out but it isn’t very honorable (IMHO). That of course is a matter for your own conscience. Certainly your soon-to-be Ex-Wife should be held accountable for her part in the mess but likely even if she is ordered to pay her portion of the bills (In your divorce decree) she may not. You could still be liable if your name was on the accounts that she doesn’t pay.
You may think you don’t need a good credit rating now but what happens in 5 years when you want to buy a house of your own? Or if you ever want to re-marry (probably a far thought from your mind currently)? Bankruptcy haunts you for a long time (7 years or more).
Before you do anything, please see my advice in these threads about financial problems. At least consider this book before you do anything life changing.
It was mentioned that the soon to be ex should be responsible for her portion of the debt. You don’t mention how much of the debt is in both of your names but if you file for bankruptcy and upon dismissal, the creditors will go after the soon to be ex in full force for the amount owed. Even the vehicle she has could be repossessed depending on the wording of the loan agreement. A legal forum I frequent gets lots of folks that say that their ex filed bankruptcy and the creditors are coming after them. All we can tell them that yes, the debt is now entirely theirs and the only legal options they have is to pay the bills or file bankruptcy themselves.
As for the money needed to file, it will cost anywhere from $500 to $5000 depending on your debt load and how complex your filing is. The average is about $1200. You stated that you may borrow the money to file, there is a much easier way to raise it, quit paying on all the debts to be discharged now. Thats right, quit paying on all the bills and save this money. If you are putting out $1000 a month towards the debts to be discharged, don’t pay for 3 months and you have $3000 to use for a lawyer. You will want to contact a lawyer early in this process, that way when the calls from the creditors start coming in, you direct them to the attorney, he tells them his client is filing bankruptcy and that by law, they cannot contact the creditor again. I would also get the ball rolling soon, there has been activity in Congress the past few years to overhaul the bankruptcy system, with all the other distractions available, the reform could get pushed through without a lot of fanfare.
Some of these debts hadn’t been paid in a long time. A lot of bills I assumed had been getting paid (my wife handled our finances) were not…I don’t know where the money went. But anyway, I haven’t been paying, and the creditors have been harrassing the hell out of me. I wouldn’t mind it if I lived alone, if they get hold of me I just tell them that I’m not home, but my mom lives with me and I hate it that while I’m at work she has to get up and answer the phone several times a day for an automated message or a rude collector - she’s not in the best of health.
Anyway, I’m pretty sure my Mom could loan me $1200 for a bankruptcy. And I don’t really care if my wife gets stuck with the rest of the debt…I don’t really hold a grudge against her, but 90% of those bills were money spent on her.
I used to work in credit and collections. Unless things have changed, you can tell a creditor to “stop calling” and any communications must be via written communication. Keep track of when and how many times they call and if they continue to call, you have some leverage with them.
There used to be a book called “The Debtors Bill of Rights” or something like that.
I highly recommend credit counseling. Many times, your creditors will agree to stop interest charges, lower payments, etc… in order to get this worked out. They would rather you pay something rather than losing on their end. Yes, they can write off the debt but not sure how that looks on their corporate taxes.
I agree, exhaust all your other options before doing the bankruptcy thing.
Is your soon-to-be-ex wife onboard with this? What provisions have you made for splitting the debt responsibilities? What does your divorce lawyer say? [sub](and please,please, please tell me you have retained one) [/sub]
Assuming our debts are 40,000-70,000 you you could probably pay it off in 3-5 years of frugal bachelor-staying-with-mom living. Good credit is often a necessary tool for getting a house or apartment or building a new life after you divorce. I know it seems pretty bleak right now but at some point you will want to move out of your mother’s house and get your own place. Crappy credit might make that an iffy proposition.
The joint debts should be settled in the divorce. Who owes what to whom should have been clearly set out and all the creditors should have been informed on who was now responsible. I hope that is your case.
I did the bankruptcy thing in '92. Believe me if there was any other way I would not have done it.
However I am still in debt.
Is there any money owed to the IRS or a state tax commission? That debt will not go away. My ‘Trustee’ took a large ammount of money from me and a list of my debts. He was supposed to pay what he could and what ever manner he decided and then tell me was was left to be paid and what creditors were told no. He never gave me that report and I left the state in disgrace and shame and moved to NYC. Recently I found out that he did not pay the state taxes, which have been collecting interest for 10 years. The state never tried to find me or at least not very hard. so basically I’m screwed. I’m looking into getting a lawyer to work out a settlement and hopefully get the penalties and interest to go away otherwise I’ll be in debt till I die.
So to sum up. If there is any other way to do this then don’t file. If you do file don’t buy into that ‘shame and dishonor’ business and remember that you still have legal rights and people have to follow up on their end of any bargains.
Sometimes in a bankruptcy you will pay back your debts at a smaller rate. Maybe 10 cents on the dollar or 50 cents on the dollar or whatever. That’s better then having it all discharged.
I only make about $23,000 a year at my new job. I owe more than that, and rent and bills eat up most of my money.
I guess I could start telling the creditors not to call (I didn’t know you could do that), but I’d still have that debt riding over my head, and I don’t like that. I know I don’t want to spend the next several years paying on it.
I haven’t retained a divorce lawyer yet…financial situation made it impossible. The money situation has been really tight for me, and even worse for my wife.
Before doing anything else, get the car thing straightened out. If it is in both your names, should she simply stop making payments, you will be on the hook for the loan. In any case, you should be compensated for your interest in the car. I also hope that you cancel any and all credit cards that have her name on them. Pick the card you owe the least amount on, request a new card with only your name on it and then pay it off. You will be astonished at how difficult it is to accomplish some simple transactions without a credit card.
I meant to add, don’t be too nice a guy in the divorce and don’t fail to protect your rights. I mean, really protect your rights as in don’t agree to anything without your attorney’s input.
I would also like to cast a strong vote against bankruptcy. I’ve written lots of personal finance articles and can tell you that a simple (okay, not simple) but “easy-on-the-surface” solution like that can turn into an absolute nightmare, especially down the road when you turn things around.
I would strongly advise reading as much as you can on www.fool.com and creating a plan to solve your debt problems. They have some chat boards where you can discuss your problem with others in the same situation and then, when you work it out, you can do the Happy Dance to celebrate. IIRC, Clark Howard has some info and he could be a big help in reducing your expenses to the bare minimum and teaching you how to set up a payment plan with each of your creditors.
As a last resort, or maybe not, did you ever check out www.savekaryn.com?
I would recommend that you read the pamphlet published by the Association of the Bar of the City of New York, Filing for Individual Bankruptcy: What’s It All About?. This pamphlet is focused on New York City and the suburban counties in New York State, and some of the information will vary based on your jurisdiction (particularly the section on exemptions). However it is a good general overview of personal bankruptcy laws and procedures.
You may want to check with the bar association in your state or your city, who may have additional resources or referral programs.
My mother-in-law has declared bankruptcy like three times and swears by it. Then again, she’s not exactly right in the head, if you know what I mean. She seems mostly fine financially, however.
I don’t know much about bankruptcy, but I can relate my personal experience, which seems to go against many voices here. When I divorced, the idea of having a bankruptcy on my record for 7 years was enough to keep my from filing.
With a decent job (I was a teacher), an apartment, and two babies, we damn near starved trying to keep on top of bills–and I never, no matter WHAT, could do it. I simply, like you, made less than I owed. I lost my car, and spent YEARS paying off a relatively small debt; overall I owed less than $15000 or so.
Now, some 12 years later, it’s finally all paid off. In the meantime, I got into more bad debt (because all of my money was going to pay my original bills), my credit rating is in the gutter, and I couldn’t get a loan to save my life.
From my rather bitter point of view, honor means nothing to the people you will need to loan you money down the line. No one cares that I PAID my debts–all that matters to a loan officer is that it took me too long to do so. In retrospect, if I had declared bankruptcy, I could have used my income more wisely, kept myself from getting further into trouble, and would possible be more on my feet now.
Of course, I could be wrong, and I will trust the judgement of more learned Dopers on this one. Like I said…personal experience only here.
He filed the type (Chapter 13?) where you pay back your debts - just via a trustee and with no interest.
Took him years to get it to fall of his credit report. It does though, and, as bodypoet’s experience tells you, it can take just as long for your current financial nightmare to fall off.
The real shame was it was over a rather small amount of debt. Student loans he hadn’t paid, but only owed a couple hundred dollars. Problem was, back then he had no way to get his hands on a couple hundred dollars, and wasn’t making enough to break even. The total bankruptcy was only for something like $12,000.
I’d really recommend consulting an attorney about both the divorce and the bankruptcy.
I agree with consulting an attorney. I am a bankruptcy paralegal, and though I am in no position whatsoever to offer legal advice, I would strongly caution you against filing unless you have no other alternative whatsoever. Declaration of bankruptcy is the ultimate legal remedy, not a swift way to avoid bill collectors. So yes, read the link Billdo posted, and do see an attorney.
Well, I tried the ‘Don’t call me’ thing on a collector just now. The person I spoke to knew of no law that prevented him from calling a home number, even if I request they do not, and when I asked to speak to a supervisor or escalate a call he said it was impossible, and that he had no way of noting that number was not to be called, that it was an automated system that dialed for them from a list. I put him on hold while I came to look up the rights under the act, and he had hung up by the time I got back (less than a minute).