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We met with the attorney last week and shared our current financial situation. My wife doesn’t work. She goes to school part time and takes care of our two children. I make a pretty decent salary, just shy of $73,000. On top of that, I have a few “side gigs” that I receive money from. Not a lot, ha… if it were, I wouldn’t be speaking to an attorney about this.

In total, we have $53,000 worth of credit card debt. One student loan for $10,000 and one automobile loan for $3,800 and monthly mortgage(s), totaling $3,600.  A few months back we went to a local Debt Reduction Services (aka: Consumer Credit Counseling Services). I have to be honest, I was pretty excited about the idea. They take all of your bills and contact your creditors. They negotiate a lowered interest rate and at the end of the meeting they tell you that in 39 months, you’ll be debt free. That was it, that’s all I needed to hear. It was like this woman was shining a light in my face and saying in less than 4 years, you’ll have no more debt. So our monthly credit card payments went from $1900 to $758. Not bad, right? A month into the program and a letter shows from our mortgage company. “We’re sorry, you underpaid your escrow last year”. So because of some ridiculous over site on someones part, my mortgage payment is now $540 more a year.

My boss once told me an old saying (I want to say Amish, but I’m sure I or he is wrong),

“Man plans, God Laughs”

Well he sure did. So we stressed and looked at every option, in the process we missed our second payment to the Debt Reduction Services company. CitiBank dropped us and then required more money. What a sinking ship I got on. How did this happen? How do I get off? Well, the attorney explained how.

Chapter 7

New York State will allow me to wipe away all of our debt (not including the student loan). I can keep my house (but have to pay back the second mortgage). I can keep my car, but can let them repo it, if I want. I’m still on the fence about this, to be honest. I drive an older car that is worth half of what I owe on it. But on the other hand, that would require me to get a lump sum together to buy a new car.

My salary does require us to go through the “means test”. He feels good that we’ll pass, but because I try all these new ways to make money it complicates it a little for him/me/us. It’s funny, because the IRS is ok with me spending money to make money, but the state could careless, when it comes to bankruptcy. Oh well, I just pray this wont cause a problem.

So with a Chapter 7 comes the following negatives, that he wanted us to think about:

1. Your credit is shot. To be honest, it’s horrible now, but it will be worse.

2. Bankruptcy stays on your credit for up to 10 years.

3. The stigma of filing bankruptcy.

I’ll be honest, I felt like I’d have a stomach full of knots when I left his office. I didn’t. I had hope that we’d be able to start over fresh. We could keep our home (although he suggested we let it go and start over when the market gets better) and live. I can’t tell you the last time I was able to take my family out to eat, or a night I didn’t stress over 10 or 15 things I needed to do or address. I wouldn’t need to do it. Although, I will continue trying to make money. I don’t want to just get by. I crave the day that I can look at my bank account and see a “few months in the bank”. So with the negatives, there are positives.

This week, my homework is to put all of our salary that I’ve received over the last 6 months into a spreadsheet. I’ll take it back to the attorney for his blessing that I’ll have no issues on passing the means test. The equity issue in our home is a non-issue. We owe more than it’s worth, that’s to a sinking market.

I understand that I can take my last paystub and use that for my tax returns. I’ll be doing that as soon as I can next month/year. Still need to pay the attorney $2500 in total, plus $300 to the state.

- Average Joe

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