Bankruptcy: Viable Choice?

[Tsuga]

It's been seven years since the recession and many debts from bankruptcy are going off people's records. I am happy for them.

Sort of.

In three years, if we had declared Bankruptcy, we would have:

10 years of savings
Clean credit
No debt

However, we did not declare. We couldn't as we did not buy a home on variable or high interest. No new cars. Instead, we were saving for a large down payment. When the recession hit, and we lost jobs / got made part time, we used the $ to pay off our cars and cover medical and other bills for a couple of years. When that ran out, I went back to school with modest but real student loans. My goal was to keep us off public assistance.

Three years from now, our family will have substantial debt. No home. Own one crappy car.

Reading about bankruptcy, I wonder... Are we fools to keep scrimping?

We will not be able to pay the kids' college. We don't have a house, no nice cars. Clothes are hand-me-downs. Our clothe are bought using credit card rewards, once every five years, if that.

All we'd need to declare bankruptcy is to use our credit to make a couple big purchases. We would fall behind.

Ten years from now, we get our second chance, and we'll have savings. Maybe even a home! Because we'd have cash. Cash we did not spend on paying for medical procedures we couldn't afford.

If we don't, all our savings goes to interest... I would take it, suck it up, except recent press leads me to believe that the smart people are done suffering from the recession. But we will suffer for life. No retirement, no college for kids...

I never in my life thought I'd consider this but I'm tired. Tired of making prudent choices and getting screwed. I don't want to pay a financial advisor until I understand. What am I missing?

I wouldn't do it for me, but like everyone I have to think of the kids.

Is it really fair to say, no kids, no college for you--I was too proud to declare bankruptcy?

 

I just want to say thanks for so many non-judgmental responses. I do appreciate it. I know I sound like a negative Nellie and this is kind of a vent but I'm glad you didn't all JAWM. I am grateful for our health and what we do have. I do feel let down but I need to cope. I will look at major debt restructuring and see what they say about bankruptcy. I know it sounds nuts but a lot of joy I get in life is from doing my part. The idea that I'm not doing my part just kills me. I don't want my kids asking for charity for college. I want to "do my part". I will have to work more. Thanks for your understanding.

[Ethel Mertz]

First, hugs to you.

 

Second, yes, bankruptcy is a viable option. Please consider it. Unfortunately, bankruptcy doesn't cover student loans, but it will cover other kinds of debt (medical, credit card, personal, etc.). Find a good lawyer. 

 

So many people need to do this and it is absolutely fine. This is why bankruptcy exists. It will give you a second chance. Put your pride aside. It will all be ok.

 

You accidently posted two threads, so you might want to check both for replies. (I posted in both.)

[Guest]

No, you're not a fool. I suppose this is my morality talking, but if I have the means to pay for something at ALL I have no business declaring bankruptcy over debts. If someone is working with me for a payment plan, I can do it with credit and savings and care, no business declaring bankruptcy.

 

If I would have ten years of no debt thanks to bankruptcy, but could have managed? All I did was make my debt someone else's problem and make *them* eat it. I can't, in good conscience, advise that.

 

/person with huge medical and personal debt, six months left of student loans, and a crappy old car we can barely afford to replace ;)

[Ausmumof3]

I don't know but I hate how society seems to work in favour of those who take on massive debts more than those who are cautious and responsible.

[Tsuga]

 

 

Dh and I declared bankruptcy 7 years ago, when we declared, we did the wage earners so that we could keep my old car. Now dh has a truck (just paid it off), we own our home (land contract) and I have a 2013 Ford Fusion (that we have decent interest on). To us it was worth it, we declared pre-kids (young and dumb as far as credit use went). 

 From Mom to C and J.

 

When the recession hit DH was unemployed for TWO YEARS.  Both of us had worked for close to 20 years, but due to a quirk, DH could not collect unemployment.  We had some nice savings and went through all of it - every dime.  We still have not rebuilt any savings.

 

I remember feeling very strongly that we were responsible, saving, working adults, and it made no difference at all.  A lot of people who worked the system came out of it much better than we did.     :grouphug:

 

From GoldBerry.

 

And yes, we were in that situation, more or less.

[Tsuga]

 

 

Second, yes, bankruptcy is a viable option. Please consider it. Unfortunately, bankruptcy doesn't cover student loans, but it will cover other kinds of debt (medical, credit card, personal, etc.). Find a good lawyer. 

 

 

 

You know what is the most pathetic thing?

 

With my superb credit, which will turn to crap in a couple years as recession bankruptcies enter the market and the number loses more meaning, I could actually feasibly transfer these to credit card and other debt in a relatively short time. I'd have to take on the interest rates, but if my plan was to make it all bankruptcy-eligible, I could do that. Because I have good credit.

 

That's how screwed up the system is. The ONE thing I took on debt for, my one ultra-luxurious investment for myself, the one responsible thing... I cannot be forgiven for. I pay into that, pay it all down hard (mind you I paid for CC cash working 40 hours a week during school and 60-80 in summer, at 17, 18, 19, got minimal loans and paid them on my public sector salary by staying in a room, not a house, and saving for the first ten years of my career, so I know I am perfectly capable of paying down debt, and I am doing it now, I am trying hard). And I pay my bills on my credit cards making minimum payments. That way, I can turn student debt into consumer debt. I can declare bankruptcy.

 

I would never think about this. But I was reading how many people got their debts erased during the recession. And all I can think is: in three years, the one thing I have, my good name, will be worth nothing. Because all those credit records will be good as gold, just as good as mine. The banks will look at all of us the same, but they'll have cash and a low debt-income ratio. I am about to get massively screwed.

 

I don't want to disparage bankruptcy. I'm considering it myself. But we made massive financial sacrifices, and still are--even to the point of sacrificing our kids' futures--in order to stay "in good standing". My fear is that we will lose even that. And then we have absolutely nothing.

 

It will take me approximately 12 months to convert student loans into consumer loans and max out my credit.

[Alte Veste Academy]

All we'd need to declare bankruptcy is to use our credit to make a couple big purchases. We would fall behind.

 

Personally, I think this is unethical. 

 

If part of your debt load is credit cards, can you do a consumer credit counseling payment plan (reduced interest and payments), then snowball all that toward the other debts when it is paid off?

 

I think it is sad that the person who takes responsibility for debts is many times worse off than the person who does not.

 

I do think it is great that there is the bankruptcy option for people who literally cannot pay their bills due to bad luck, unforeseen misfortune, etc.

[Bluegoat]

It might be worthwhile to talk to someone about this - I know there can be long term consequences at times.  i have heard of people in some cases having a hard time renting housing, for example. 

 

I think for myself, I would have a hard time purposefully buying the things to cause it to happen.

 

The system is screwy though, and frustrating.

 

I think, though, I would not be too hard on yourself about the college thing.  Lots of people can't afford it for their kids, and I am not sure that is really a bad thing, and it doesn't make them bad or inadequate parents.  You shouldn't hold yourself to a different standard in this, I think. There are all kinds of other possibilities.  (Actually, I have a feeling that over the next 20 years, the higher education landscape will change significantly.)

[MomtoCandJ]

In our case we had tried a credit counselor first but then dh was laid off (not enough time in to collect unemployment) for several months and my income as a gas station clerk wasn't enough to cover even the essentials.

We waited to declare until after dh found another job, his parents paid the car payment for us until that point. The payments for bankruptcy were taken directly from dh's pay checks. It was pretty tight for awhile as we caught up on other bills.

[Alte Veste Academy]

I would never think about this. But I was reading how many people got their debts erased during the recession. And all I can think is: in three years, the one thing I have, my good name, will be worth nothing. Because all those credit records will be good as gold, just as good as mine. The banks will look at all of us the same, but they'll have cash and a low debt-income ratio. I am about to get massively screwed.

 

:grouphug: That is not fair. 

 

Blech. I'm living in lalaland, I guess. I would have thought the bankruptcy gurus would be able to see through this purposeful transfer deception and invalidate the option. Blech.

[Joker]

We declared bankruptcy several years ago due to medical debt. We had a new credit card (for emergencies that we still have and carry no balance) with a decent rate within three months. We bought a home three years after declaring bankruptcy (with a great rate). We've purchased two new cars since with great rates and no issues as well. We were terrified that declaring bankruptcy would completely screw us but it hasn't at all (our credit score actually bounced back up into the 700s rather quickly after we received, and used wisely, the credit card).

 

 

ETA: The absolute worst part was being told not to pay our bills during the process. We had fallen into a rut of getting groceries and gas with our credit cards because our wages went to medical bills. It was very difficult to just stop paying those bills but by doing so we saved up the money to pay the legal fees. I felt like a horrible person but there was no way we could ever get ahead of the medical debt and some had started sending to collections because we couldn't pay more than a few bucks a month.

[SKL]

I would just say never say never, as far as being able to have a house and be debt-free.  I felt the same way once.  It took a long time, but I turned it around and ended up comfortably in the black.

 

The close people I know who have been bankrupt are still essentially bankrupt, and no, they do not have great credit.  And no, they cannot help their kids pay for college.

 

It's like dieting - the only real long-term solution is a truly sustainable change in the fundamentals.

[Murphy101]

Yes bankruptcy is a viable and often a smart and good choice. It's often a blow to pride, but pride is just another luxury many people can't afford and insisting on hanging onto it can be to some's detriment. I don't know if that applies to you or not. You'll have to decide that for yourself.

 

Medical debt is the bulk of over 60% of all bankruptcies.

 

Though there are always those who abuse the legal system, most of those who file bankruptcy are hard working people who hate debt and wish they had had any other option than the debt that eventually grew to be too much for their future prospects to provide for.

 

To me, asking if bankruptcy is a viable option is like asking if a life preserver is a viable option for a drowning person. Yes. Of course it is. That's what it is there for.

[Alte Veste Academy]

Yes bankruptcy is a viable and often a smart and good choice. It's often a blow to pride, but pride is just another luxury many people can't afford and insisting on hanging onto it can be to some's detriment. I don't know if that applies to you or not. You'll have to decide that for yourself.

 

Medical debt is the bulk of over 60% of all bankruptcies.

 

Though there are always those who abuse the legal system, most of those who file bankruptcy are hard working people who hate debt and wish they had had any other option than the debt that eventually grew to be too much for their future prospects to provide for.

 

I agree with this. 

 

 

 

To me, asking if bankruptcy is a viable option is like asking if a life preserver is a viable option for a drowning person. Yes. Of course it is. That's what it is there for.

 

I agree with this depending on who is asking. Unfortunately, I know some very immoral people who have abused the option.

[marbel]

I have an ex-relative who filed bankruptcy and I remember this persons making excessive purchases just prior to filing so that they would have less cash/more debt, but have "stuff" they wanted.  This individual never recovered financially, even though it was well over 10  years ago. 

 

That said, I think there are good reasons for filing. I think you need to look at your individual circumstances.   It is lousy that people who make poor choices often seem to come out ahead of the responsible ones, but I don't think it's good to make the decision based on that.  If it's right, it's right, but if it's wrong, it's still wrong even if it might be profitable, kwim?  

 

(And I am not saying it's wrong for you: of course I don't know!)

 

:grouphug:

[Crimson Wife]

Whether bankruptcy is moral is one of those things that REALLY varies from person to person.

 

Medical debt is a different category from consumer debt because it's typically not discretionary spending. Especially before Obamacare put an end to caps on health insurance payouts people could find themselves unexpectedly on the hook for hundreds of thousands of dollars as the result of their baby arriving prematurely or whatever. I know somebody whom this happened to and I don't blame them one bit for declaring bankruptcy.

 

Extended unemployment, not being able to work because of injury or illness, death of or abandonment by a spouse- there are all sorts of unforeseen woes that could leave a good person needing to declare bankruptcy. It happened to a LOT of good people during the Great Recession. There but the Grace of God go I and all that.

 

I do think there are plenty of immoral people who abuse the system but I think I'd rather have a system that allows for a second chance than not even if some people abuse it.

[PinkyandtheBrains.]

 

 

Yes bankruptcy can be a viable option. Find a reputable bankruptcy lawyer, the can really lay out your legal options and help determine if it's suitable in your situation.

[Shellydon]

Your kids can go to college without your help.  Thousands upon thousands of kids do.  I did, DH did.  I wouldn't declare banruptcy just for my kids college.

[idnib]

:grouphug:

 

I'm sorry you are suffering. It's a very personal decision.

 

I agree with talking with a reputable bankruptcy attorney and laying out your options in the cold light of day, not the dark stress of sleepless nights.

 

Bankruptcy has pros and cons (including psychological) and you'll have to weigh them. Professional guidance will give you the information you need to make a decision.

[Anne in CA]

Well, two different times dh and I SHOULD have declared bankruptcy, but we rebuilt our credit and now have a profitable business... so it varies. If you had declared there is no guarantee that things would have worked out, it might have kept one of you from getting a dream job, or any number of things. You did the best you thought you could. Second guessing yourself causes a LOT of pain. Maybe you should have, but focusing on what you should have done won't fix anything. Focus on what you WANT, and let it come to you.

 

I am sorry, though. I have suffered from the modern economy myself. Thinking good thoughts and planning for a new future is probably the best you can do. My second child is working his way though college working at McD's and believe me, that is not what I would have wanted. But the good news is that he is making it work. Giving your kids a good education now will make them mentally flexible to deal with the future. I have seen it over and over again.

[Tsuga]

It's like dieting - the only real long-term solution is a truly sustainable change in the fundamentals.

I don't know what to change, though. We have looked at our bills and other than eat less, no sports and child care for kids, and latchkey kindergartener... There is nothing.

 

I even started skipping lunches at work of I forget leftovers.

 

I don't have cable. No data plan. Eat out 2x a month and that's gas food. If we don't do that, we save about $50. At that rate, i will pay $600/year more. Saving all that will lead nowhere. Last time I saved, i lost everything in unemployment. I am afraid saving again, sacrificing now, will lead to present suffering with no future benefits.

 

It's a big reason I do let my kids have lessons.

 

I no longer believe that present sacrifice leads to future security. It just doesn't. People who didn't save are better off than we are.

 

I've never had a new or nice car. I have never owned a diamond. I never went on vacation on a plane. I should be further ahead. I WAS further ahead.

 

I feel my work was for nothing. Change my diet... Okay, what will I give up? Music?

 

No. I sacrifiecrd that before and what did I get for my sacrifice?

 

I feel like, advice like yours: Save, spend responsibly, wait to have kids, work hard, etc etc was what got me here in the first place. I need to start working smart, not hard. If not bankruptcy, then what?

 

How can we pay off this debt, save, and still not be screwed the next time around?

[Tsuga]

Re: College. Yes, I know. I worked through it myself.

 

That's why I don't have a house now. I wanted better for my kids. I worked hard for nothing. That's what gets me. It's not like I screwed up, had a kid out of wedlock, messed around in high school. You know the brag threads? I was that kid, that young adult. Gifted classes, scholarships though small, worked, prestigious, meaningful work, promotions, marriage, savings.

 

That did not work. I want to do what works now.

[PinkyandtheBrains.]

I don't know what to change, though. We have looked at our bills and other than eat less, no sports and child care for kids, and latchkey kindergartener... There is nothing.

 

I even started skipping lunches at work of I forget leftovers.

 

I don't have cable. No data plan. Eat out 2x a month and that's gas food. If we don't do that, we save about $50. At that rate, i will pay $600/year more. Saving all that will lead nowhere. Last time I saved, i lost everything in unemployment. I am afraid saving again, sacrificing now, will lead to present suffering with no future benefits.

 

It's a big reason I do let my kids have lessons.

 

I no longer believe that present sacrifice leads to future security. It just doesn't. People who didn't save are better off than we are.

 

I've never had a new or nice car. I have never owned a diamond. I never went on vacation on a plane. I should be further ahead. I WAS further ahead.

 

I feel my work was for nothing. Change my diet... Okay, what will I give up? Music?

 

No. I sacrifiecrd that before and what did I get for my sacrifice?

 

I feel like, advice like yours: Save, spend responsibly, wait to have kids, work hard, etc etc was what got me here in the first place. I need to start working smart, not hard. If not bankruptcy, then what?

 

How can we pay off this debt, save, and still not be screwed the next time around?

People can do everything "right" and still find themselves facing bankruptcy. All the advice we are given isn't always enough.

 

<hugs> it's hard and frustrating.

[abacus2]

Of course bankruptcy is an option. That is why we have it.

 

For most people with credit card debt, I think it makes more sense to stop paying when you are unable to pay and settle for a lower amount later. It is like bankruptcy, but leaves the courts out of it. You have to deal with lots of angry communication from creditors though.

 

 

[IfIOnly]

It's been seven years since the recession and many debts from bankruptcy are going off people's records. I am happy for them.

 

Sort of.

 

In three years, if we had declared Bankruptcy, we would have:

 

10 years of savings

Clean credit

No debt

 

However, we did not declare. We couldn't as we did not buy a home on variable or high interest. No new cars. Instead, we were saving for a large down payment. When the recession hit, and we lost jobs / got made part time, we used the $ to pay off our cars and cover medical and other bills for a couple of years. When that ran out, I went back to school with modest but real student loans. My goal was to keep us off public assistance.

 

Three years from now, our family will have substantial debt. No home. Own one crappy car.

 

Reading about bankruptcy, I wonder... Are we fools to keep scrimping?

 

We will not be able to pay the kids' college. We don't have a house, no nice cars. Clothes are hand-me-downs. Our clothe are bought using credit card rewards, once every five years, if that.

 

All we'd need to declare bankruptcy is to use our credit to make a couple big purchases. We would fall behind.

 

Ten years from now, we get our second chance, and we'll have savings. Maybe even a home! Because we'd have cash. Cash we did not spend on paying for medical procedures we couldn't afford.

 

If we don't, all our savings goes to interest... I would take it, suck it up, except recent press leads me to believe that the smart people are done suffering from the recession. But we will suffer for life. No retirement, no college for kids...

 

I never in my life thought I'd consider this but I'm tired. Tired of making prudent choices and getting screwed. I don't want to pay a financial advisor until I understand. What am I missing?

 

I wouldn't do it for me, but like everyone I have to think of the kids.

 

Is it really fair to say, no kids, no college for you--I was too proud to declare bankruptcy?

 

Bankruptcy: BTDT and best thing we could have done. No regrets. We had no credit card debt though, just mostly real estate and some medical. You have to make a list of all your assets and everything that isn't necessary is up for being collected to pay off debt. We had nothing extra except a $300 boat that we use for feeding our family so we got to keep it. Anyways, would just stopping payments allow you to be eligible for bankruptcy? Maybe buy something, not use it, and give it back? I don't know how ethical that is, but I couldn't buy something on credit knowing we would be going bankrupt. That just seems wrong. Hugs, hugs, and more hugs.

[Tsuga]

Thanks for all your thoughts, positive and negative, and sorry for whining.

 

I am so frustrated right now when I read "how to be financially responsible". I feel like commenting on those articles, "No! Don't do it! It gets you nowhere!"

 

I know I shouldn't but that's how I feel right now.

 

If I pay my student loans an put living expenses on a credit card, the interest will be enough to put me over the edge, actually. I don't need to buy anything, I realized. It is EXTREMELY frustrating to think that if I'd have bought a truck as my primary vehicle, I could just walk away with it, but getting a degree in an education- and poverty-alleviation field, I will pay until I die. I can't even tell you how stupid I feel. (Note that a nice truck costs as much as my master's degree.)

 

We will make it. Thanks for all the tips. Contrary opinions are still welcome.

[IfIOnly]

Thanks for all your thoughts, positive and negative, and sorry for whining.

 

I am so frustrated right now when I read "how to be financially responsible". I feel like commenting on those articles, "No! Don't do it! It gets you nowhere!"

 

I know I shouldn't but that's how I feel right now.

 

If I pay my student loans an put living expenses on a credit card, the interest will be enough to put me over the edge, actually. I don't need to buy anything, I realized. It is EXTREMELY frustrating to think that if I'd have bought a truck as my primary vehicle, I could just walk away with it, but getting a degree in an education- and poverty-alleviation field, I will pay until I die. I can't even tell you how stupid I feel. (Note that a nice truck costs as much as my master's degree.)

 

We will make it. Thanks for all the tips. Contrary opinions are still welcome.

 

I'm not sure if you'd be able to be able to keep it actually? I was under the impression that if you had a nice vehicle you may have to sell it and get something more modest? I don't know though because we had a $5,000 KBB used vehicle. I know that wasn't your point though. I'm sorry you're in such a stressful situation.  :crying:

[IfIOnly]

 

 

The motor vehicle exemption helps determine whether you can keep your car, truck, motorcycle, van, or other automobile in Chapter 7 bankruptcy. To determine if you can keep your vehicle in Chapter 7 bankruptcy, you calculate the equity in your car and compare that number to the applicable motor vehicle exemption.

http://www.nolo.com/legal-encyclopedia/the-motor-vehicle-exemption-can-you-keep-your-car-chapter-7-bankruptcy.html

[Guest]

You know what is the most pathetic thing?

 

With my superb credit, which will turn to crap in a couple years as recession bankruptcies enter the market and the number loses more meaning, I could actually feasibly transfer these to credit card and other debt in a relatively short time. I'd have to take on the interest rates, but if my plan was to make it all bankruptcy-eligible, I could do that. Because I have good credit.

 

That's how screwed up the system is. The ONE thing I took on debt for, my one ultra-luxurious investment for myself, the one responsible thing... I cannot be forgiven for. I pay into that, pay it all down hard (mind you I paid for CC cash working 40 hours a week during school and 60-80 in summer, at 17, 18, 19, got minimal loans and paid them on my public sector salary by staying in a room, not a house, and saving for the first ten years of my career, so I know I am perfectly capable of paying down debt, and I am doing it now, I am trying hard). And I pay my bills on my credit cards making minimum payments. That way, I can turn student debt into consumer debt. I can declare bankruptcy.

 

I would never think about this. But I was reading how many people got their debts erased during the recession. And all I can think is: in three years, the one thing I have, my good name, will be worth nothing. Because all those credit records will be good as gold, just as good as mine. The banks will look at all of us the same, but they'll have cash and a low debt-income ratio. I am about to get massively screwed.

 

I don't want to disparage bankruptcy. I'm considering it myself. But we made massive financial sacrifices, and still are--even to the point of sacrificing our kids' futures--in order to stay "in good standing". My fear is that we will lose even that. And then we have absolutely nothing.

 

It will take me approximately 12 months to convert student loans into consumer loans and max out my credit.

Big, big hugs. I am right there with you - we have done that very thing, transfer debt to credit card and play the transfer/pay it off/zero interest until _____ game. It's helped a bit in us consolidating our debts but it's very frustrating to be financially responsible, paying for our own medical, food, etc with zero assistance, living hand to mouth for years, and feel like we are suffering for being responsible.

 

It actually kind of makes me want to strangle people. Which is bad.

[tm919]

*hugs* I couldn't read this without replying! I often think being financially responsible is the biggest drag ever. It is psychologically wearing, both the big things (my kids will never go to Disneyland, pretty much all their friends have) and the small ones (really, I would love to be able to go to the hairdresser to have my hair cut rather than doing a terrible job and pulling my hair up) -- when one big medical bill or job loss could erase those years of sacrifice. Right now, we're ahead but I have no illusions of how easily that could disappear.  Unfortunately, I think this is a reality for all but the extremely wealthy. Just typing that made me feel bitter.

[creekland]

Mainly offering hugs and wishing we were unlimitedly wealthy to where we could fix issues like these.

 

I wish NO ONE had to declare bankruptcy for medical reasons.

 

With student loans, I wish all jobs requiring a college degree paid enough to make those degrees worth the cost.

 

With bankruptcy, I have no issues when people choose it for medical bills they'll never be able to pay or for extended unemployment.

 

For anything else, it's definitely a case by case situation.  Like others, I know some who abuse the system and some who don't.

 

We lost a ton in the economic downturn.  It was incredibly frustrating.  Fortunately, hubby is good enough at his job that he was able to expand worldwide for us to "make it through" and now the economy is back again in our area.  We'll never regain what was lost, but it's definitely nice not being as financially challenged as we were.  If it weren't for my mom, we'd have lost more than we did.

 

Any chance your job(s) can change to bring in more income?  Would a move help?

 

No matter what, kudos to you for wanting to be active and changing something.  Nothing would ever change without that "do something" attitude.  Now you're fishing for a plan - awesome way to glean the Hive's knowledge and experience.  I, for one, appreciate that you aren't asking for JAWM as well.

[Greta]

Binip, I mostly just wanted to offer some hugs. Struggling and struggling and sacrificing and sacrificing and then feeling as if it's not getting results, well that would be enough to wear anyone down.

 

But I'm having a hard time understanding how bankruptcy would help in your particular situation. You said you don't have any real estate or car debt. You used your savings to pay for medical and other needs, so I'm guessing you don't have medical debt. Your student loans would not be forgiven in bankruptcy, right? And you'd have to actually run up some debt in order to be able to declare. So I don't understand what good it would do you. What *current* debts would it wipe out? I must have just missed it, but I didn't understand what it would accomplish for you.

[forty-two]

Binip, I mostly just wanted to offer some hugs. Struggling and struggling and sacrificing and sacrificing and then feeling as if it's not getting results, well that would be enough to wear anyone down.

 

But I'm having a hard time understanding how bankruptcy would help in your particular situation. You said you don't have any real estate or car debt. You used your savings to pay for medical and other needs, so I'm guessing you don't have medical debt. Your student loans would not be forgiven in bankruptcy, right? And you'd have to actually run up some debt in order to be able to declare. So I don't understand what good it would do you. What *current* debts would it wipe out? I must have just missed it, but I didn't understand what it would accomplish for you.

 

If I understood her correctly, the idea is that she could use all their income to pay down the student loans while putting all their living expenses on a credit card, and declaring bankruptcy to deal with the resulting cc debt.

 

I'd definitely talk to an attorney first, because I don't think it's a given to have all eligible debts forgiven in bankruptcy, to try to prevent just this sort of deliberate running up of debts you plan to not pay.

 

But it really does suck to do the responsible thing and feel like you got hosed because of it :grouphug:.

[Carol in Cal.]

I don't know very much about bankruptcy, but I do recall reading once that people who obviously position themselves for it end up having the 'positioning' debt excluded from the bankruptcy forgiveness.

[Guest]

What a disaster it would be if people could bankrupt student loans. No one would lend any money for college.

[PinkyandtheBrains.]

What a disaster it would be if people could bankrupt student loans. No one would lend any money for college.

 

I think we will find that by not allowing it in the first place we will have huge issues when a generation full of student loan debt reached middle age and then retirement.

 

There should have never been an exclusion, the system would've adjusted accordingly.

[Guest]

I think we will find that by not allowing it in the first place we will have huge issues when a generation full of student loan debt reached middle age and then retirement.

 

There should have never been an exclusion, the system would've adjusted accordingly.

And maybe college would have actually been affordable. Who can say, right?

[PinkyandtheBrains.]

And maybe college would have actually been affordable. Who can say, right?

That's the theory, but yeah.

[SereneHome]

I am firmly convinced that most middle class families are one major medical emergency away from either being homeless or having to declare BK.

 

[Halftime Hope]

Binip, my heart goes out to you.  I just wanted to tell you how much I enjoy your thoughtful posts, and I'm sorry you are in a position to start this thread at all. 

 

We, too, went through a massive unemployment period and then more than a 50% pay cut when dh finally found employment.  (We were a 9/11 casualty family, too, albeit very indirectly.) 

 

Know that I'll be thinking of you and praying that you'll have clarity so that you'll know what would best serve your needs and those of your family.

 

 

 

 

 

 

 

 

[Guest]

I am firmly convinced that most middle class families are one major medical emergency away from either being homeless or having to declare BK.

That is statistically accurate.

[StephanieZ]

I personally don't feel that bankruptcy is wrong morally. Bankruptcy is a legal aspect of contracts and business. IMHO, and as a business owner and employer, I have no problem with people using the legal system to escape from past financial tragedies or simple mistakes to get a fresh start. I've personally advised a young couple to do just that, and I believe it was the right decision for them, and they made a fresh start and have a good life now, without a lifetime of crushing debt due to a series of honest errors and foolish mistakes.

 

I personally haven't had to use bankruptcy, but if there had been a need to do that, I would have done so without moral problems. HOWEVER, I would never void a debt to family or friends through bankruptcy. If a loan/debt was incurred based on a personal relationship, then I WOULD consider it a moral imperative to make good on that debt, whether or not I was legally required to do so. Beyond personal debts of that sort, I would have had no problem using bankruptcy to void other debts. That's the same advice I'd give anyone who asked, and is how I advised the young couple I helped come up with a bankruptcy plan. 

 

To me, it's all about business, so get good advice from trusted experts, and do what makes the most sense financially for you and your family. 

 

That said, it sounds to me like you are depressed and distressed. It is certainly understandable to be angry and frustrated and distressed about your circumstance. You've tried to do the right things, and you are still struggling. Be assured that many others are in the same financial boat, and those that appear to have it all under control may well not have things under control at all. Don't judge yourself compared to others if you can help it, as that inevitably leads to unhappiness. 

 

You can both work hard and work smart. Paying student debt first makes sense, as it is indeed something that is very difficult to get forgiven in bankruptcy. Likewise, be sure not to be in debt to family or friends. Pay them ASAP if you owe any personal loans. Be sure to understand bankruptcy rules so that you don't get into a situation where your recent spending prevents you from declaring due to a perceived (or real) abuse of the system. There are rules about spending right before filing! So, saving more, working more, skimping more . . . those things can all help you redirect spending towards things like paying down/off un-forgiveable debts (in my world, those are the personal ones, the IRS ones, and student loans) . . . Also see what your state's rules are on home ownership. In some states your personal home is exempt from bankruptcy to some or to a very large extent. Be sure to investigate all these things and strategize your savings and spending, so that you do things that are in your best interest whether or not you ultimately declare bankruptcy.

 

 

If you have any wise and generous friends who could counsel you on your financial and legal situation, this is a great time to lean on a trusted advisor to help with your budget and your plan.

 

So far as college goes, IME, there is great financial aid available for those with limited financial resources. If your kids can get into an elite school, they can likely go for free. So, if any of your kids has that kind of potential, I'd focus your efforts on maxing out their test scores, etc. Some states have "Promise" or similar scholarships to pay for most/all of tuition/fees to in state schools (often funded by lotteries). If you live somewhere you kid(s) could commute to an instate school, then I'd look hard at any/all scholarship options for them there and to maximize their chances of earning such a scholarship. If your kids aren't competitive academically, then, yes, their options will be more limited, but there are doors that can open, and many schools help families find ways to finance school for their students. Just be cautious about taking on PLUS parent loans. Personally, I'd take that off the table. 

 

((((hugs)))) and best wishes.

 

 

 

 

 

 

 

[SparklyUnicorn]

Yes it is a viable option.  And if your credit is very sucky when your kids apply for financial aid, they will be considered independent students and will qualify for more need based aid.

 

Sometimes you gotta do what you gotta do.  If major corporations can have their @$$es bailed out by us, I don't have any qualms about people doing what they gotta do.

 

 

[Greta]

If I understood her correctly, the idea is that she could use all their income to pay down the student loans while putting all their living expenses on a credit card, and declaring bankruptcy to deal with the resulting cc debt.

 

I'd definitely talk to an attorney first, because I don't think it's a given to have all eligible debts forgiven in bankruptcy, to try to prevent just this sort of deliberate running up of debts you plan to not pay.

 

But it really does suck to do the responsible thing and feel like you got hosed because of it :grouphug:.

Ah, thank you for explaining. The part of your post that I bolded would be a BIG concern for me as well. This plan sounds a bit scary to me, to be honest. OP, you mentioned that you had avoided public assistance in the past, but if it's an option for you now, it seems to me like it might be the better choice. Obviously I don't know the details of your situation, so take my opinion for what little (nothing?) it's worth. But I'm just afraid that bankruptcy isn't your best option. That's not a moral judgment, but a practical one.

[SparklyUnicorn]

I think we will find that by not allowing it in the first place we will have huge issues when a generation full of student loan debt reached middle age and then retirement.

 

There should have never been an exclusion, the system would've adjusted accordingly.

 

Yup.  I'm still paying.  And I'll still be paying when my kids are in college.  So yeah how in hell will I be able to help them?  Hopefully they take that into consideration.  I don't recall if that is asked on the forms.

[Tsuga]

You would rather declare bankruptcy than use public assistance? Or are those really unrelated?

 

I say, take the public assistance. Would that get your head above water?

 

Could you prepare your kids for paying all or part of their college themselves? They could get their own student loans. Maybe even scholarships or a Pell grant? As a child I would rather take responsibility for that than see my parents file bankruptcy. But I would want to know sooner than later so I could start saving.

 

So do you currently rent? Can you move somewhere with lower rent? Income-based housing? Anything to save money. 

 

How old are your children?

 

When I took out credit, I did so so that I could continue working. I couldn't get assistance while working. If I'd have gone on assistance, I would have had to commute 1 hour to school, my kids would have had no pre-school (only the cheapest daycare for 8 hours per day because I wouldn't be able to get back and forth) and we would live in much worse housing--you know the type, sirens all night, gunshots, because they put you in the worst neighborhoods. I would have put up with it, but I thought it would be better to continue working and take on a little personal debt.

 

Plus, I really didn't want to take that much money for free. I felt that subsidized study I agreed with. Not just not working when you could be working and maxing out credit to make it.

 

I made the choice to keep working, live in student housing, and pay the extra myself, probably about $400/mo in expenses, pretty much all my food, on a credit card, and student loans for child care. Work covered rent and some of the child care, plus minimal gas. The rent was highly subsidized as a student housing program.

 

I did get a partial Pell to cover what I did not have in a fellowship. I didn't pay tuition, but the amount I was paid did not cover living expenses.

 

Fast forward to today. Years on, I'm just beginning to make a tiny dent in that debt. I will be nowhere near paid off when bankruptcies enter the market. I know that they deserve a second chance, but their second chance means that the only advantage I have, is gone. I don't begrudge them that, I just feel like I took a very stupid road.

 

So we can't go on assistance now, because we have jobs. I don't know what they will tell me to cut costs. No daycare? Less food? All that will save us money, but reading threads on here, we honestly do NOT pay that much for food for six people, including a pre-teen boy and a teen girl. We eat only clearance meats (though organic), we eat vegetarian twice or three times a week.

 

Re: Cheaper rent: We are also renting at about 50% of the market value of rentals in this area. To give an example, my stepkids' mom just found a tiny apartment for about half what we pay, and it is a two-bedroom. She looked for six months in three cities. We have four kids together. We can't move anywhere cheaper. We are so incredibly lucky to have this place. My FIL said we looked scared when we talked about the rent. You can't imagine how worried we are about losing this spot.

 

Re: Public assistance: No, because I'm earning. My degree paid off, and now, if only I work until I die and my kids don't get college paid for even in part , I will be just fine. The American dream.

 

Honestly I feel I'm missing something. It can't really be like that, can it?!? I keep waiting for someone to come in this thread and say, "No, no, you've got it all wrong. Bankruptcy affects your credit for life. You did the right thing and you'll be rewarded."

 

If I make one stupid decision--like to pay off student loans first, and rack up consumer debt to do so--then the game changes massively. The interest will be more than I can pay in my job, we can't find cheaper rent, I can't just leave my child at home during the day. We cut all music lessons for a year, but my mom might be able to pay. And voila. Within a year, I am debt free.

 

I get a "second chance".

 

I can save.

 

Re: Student loans: They cannot forgive those loans. I do believe there are changes afoot and they will be loaning less and controlling tuition more in the future which is great. But there is no way in hell they can let the existing ones get off the books. Mine is a generation of indentured servitude in a sense. They can't let my entire generation go to college for free. They loaned way too much. It is not realistic. Yes, they were jerks to jack up the prices and put me in debt for the stadiums, the programs that should have been closed, and so on. But oh well. It is too late to regret that. We can change it for our kids by saying "no" to loans and telling colleges the kids just won't go, but we cannot change the past. 

 

I did one of the "corps". At the time, it included no loan forgiveness, nothing. Now I know many people who went for free with their service. But we did not. It was by and large a relic of the times when college could be paid for by parents and hard work.

 

Maybe I will look into more creative loan forgiveness based on previous Corps service. Maybe I should call them and see if my previous payments, plus my ongoing payments, qualify me for something. Something less than 10% of my income which the present deal is. But 10% of my income for 10 years takes me up to DD1's first year in college. And then we have no savings, no home, little retirement, you know?

 

And suppose I do save. What if something happens? Our savings are a drop in the bucket, people will say go on assistance.

 

 

Re: Kids getting Pell: Nope, no qualify. :) Because I work too much. They don't take into account that I work to pay off my own loans. That's not how it was supposed to go, see. I wasn't supposed to lose everything during the recession. We had savings! They think we still have those savings. We were supposed to go to college, get out, pay it off, put a down payment, then have babies. WHICH I DID!!!!! 

 

This is the thing. They look at me, they see irresponsibility. "Why did you take out loans for such an unemployable person? Why didn't you save? Why did you have kids you couldn't afford?" And my kids get nothing. No Pell: I will pay from my income which is going to pay debts. "But you were supposed to pay those off earlier." "But I did,sir. I paid in cash. Then I had to go back to school during the recession to keep afloat."

[Liz CA]

Have you looked at some other options than bankruptcy as in moving to an area with lower COL. With a Master's degree in education (?) would you be able to find a decent paying job in an underserved area? It may not be the place you want to spend the rest of your life but could you spend 5-10 years there, repay and rebuild and then move forward in a more desirable area?

 

I would not worry about college at this point. If your kiddos are young (you mentioned kindergarten) there will be more opportunities coming along for them and you. I tend to look too far into the future - quite often only to realize that many things never come to pass or are completely different than I anticipated and wanted to plan for.

[Joker]

Have you looked at some other options than bankruptcy as in moving to an area with lower COL. With a Master's degree in education (?) would you be able to find a decent paying job in an underserved area? It may not be the place you want to spend the rest of your life but could you spend 5-10 years there, repay and rebuild and then move forward in a more desirable area?

 

I would not worry about college at this point. If your kiddos are young (you mentioned kindergarten) there will be more opportunities coming along for them and you. I tend to look too far into the future - quite often only to realize that many things never come to pass or are completely different than I anticipated and wanted to plan for.

 

Are you a teacher? Can you do the student loan forgiveness by teaching at a title I school? I don't know a whole lot about it but I know a family member who did it.

[Guest]

When I took out credit, I did so so that I could continue working. I couldn't get assistance while working. If I'd have gone on assistance, I would have had to commute 1 hour to school, my kids would have had no pre-school (only the cheapest daycare for 8 hours per day because I wouldn't be able to get back and forth) and we would live in much worse housing--you know the type, sirens all night, gunshots, because they put you in the worst neighborhoods. I would have put up with it, but I thought it would be better to continue working and take on a little personal debt.

 

Plus, I really didn't want to take that much money for free. I felt that subsidized study I agreed with. Not just not working when you could be working and maxing out credit to make it.

 

I made the choice to keep working, live in student housing, and pay the extra myself, probably about $400/mo in expenses, pretty much all my food, on a credit card, and student loans for child care. Work covered rent and some of the child care, plus minimal gas. The rent was highly subsidized as a student housing program.

 

I did get a partial Pell to cover what I did not have in a fellowship. I didn't pay tuition, but the amount I was paid did not cover living expenses.

 

Fast forward to today. Years on, I'm just beginning to make a tiny dent in that debt. I will be nowhere near paid off when bankruptcies enter the market. I know that they deserve a second chance, but their second chance means that the only advantage I have, is gone. I don't begrudge them that, I just feel like I took a very stupid road.

 

So we can't go on assistance now, because we have jobs. I don't know what they will tell me to cut costs. No daycare? Less food? All that will save us money, but reading threads on here, we honestly do NOT pay that much for food for six people, including a pre-teen boy and a teen girl. We eat only clearance meats (though organic), we eat vegetarian twice or three times a week.

 

Re: Cheaper rent: We are also renting at about 50% of the market value of rentals in this area. To give an example, my stepkids' mom just found a tiny apartment for about half what we pay, and it is a two-bedroom. She looked for six months in three cities. We have four kids together. We can't move anywhere cheaper. We are so incredibly lucky to have this place. My FIL said we looked scared when we talked about the rent. You can't imagine how worried we are about losing this spot.

 

Re: Public assistance: No, because I'm earning. My degree paid off, and now, if only I work until I die and my kids don't get college paid for even in part , I will be just fine. The American dream.

 

Honestly I feel I'm missing something. It can't really be like that, can it?!? I keep waiting for someone to come in this thread and say, "No, no, you've got it all wrong. Bankruptcy affects your credit for life. You did the right thing and you'll be rewarded."

 

If I make one stupid decision--like to pay off student loans first, and rack up consumer debt to do so--then the game changes massively. The interest will be more than I can pay in my job, we can't find cheaper rent, I can't just leave my child at home during the day. We cut all music lessons for a year, but my mom might be able to pay. And voila. Within a year, I am debt free.

 

I get a "second chance".

 

I can save.

 

Re: Student loans: They cannot forgive those loans. I do believe there are changes afoot and they will be loaning less and controlling tuition more in the future which is great. But there is no way in hell they can let the existing ones get off the books. Mine is a generation of indentured servitude in a sense. They can't let my entire generation go to college for free. They loaned way too much. It is not realistic. Yes, they were jerks to jack up the prices and put me in debt for the stadiums, the programs that should have been closed, and so on. But oh well. It is too late to regret that. We can change it for our kids by saying "no" to loans and telling colleges the kids just won't go, but we cannot change the past.

 

I did one of the "corps". At the time, it included no loan forgiveness, nothing. Now I know many people who went for free with their service. But we did not. It was by and large a relic of the times when college could be paid for by parents and hard work.

 

Maybe I will look into more creative loan forgiveness based on previous Corps service. Maybe I should call them and see if my previous payments, plus my ongoing payments, qualify me for something. Something less than 10% of my income which the present deal is. But 10% of my income for 10 years takes me up to DD1's first year in college. And then we have no savings, no home, little retirement, you know?

 

And suppose I do save. What if something happens? Our savings are a drop in the bucket, people will say go on assistance.

 

 

Re: Kids getting Pell: Nope, no qualify. :) Because I work too much. They don't take into account that I work to pay off my own loans. That's not how it was supposed to go, see. I wasn't supposed to lose everything during the recession. We had savings! They think we still have those savings. We were supposed to go to college, get out, pay it off, put a down payment, then have babies. WHICH I DID!!!!!

 

This is the thing. They look at me, they see irresponsibility. "Why did you take out loans for such an unemployable person? Why didn't you save? Why did you have kids you couldn't afford?" And my kids get nothing. No Pell: I will pay from my income which is going to pay debts. "But you were supposed to pay those off earlier." "But I did,sir. I paid in cash. Then I had to go back to school during the recession to keep afloat."

I have a problem with "they put me in debt". That just isn't true. Lots of people (not me, haha) figured out a way to get a degree that they either paid for or that would pay enough to be worth the cost.

[Alte Veste Academy]

Binip, I think you should have a talk with a credit counselor and/or a bankruptcy attorney. Unless you are prepared to lay out the specifics and numbers here, no one can really help you in the way you need.