I created a new account to write this, because I'm embarrassed to say it "out loud", even online and anonymously.
DH has early-onset dementia. He lost his ability to work in his early fifties, and since then we have pretty much gone through all our money. That process started with COBRA insurance payments that were about the same as our mortgage, and has gone downhill ever since. (He has other ongoing serious medical issues in addition to dementia. I am partially disabled and have not worked for nearly 30 years, and I've been staying home with DH because even at the early stages, he was not safe to leave alone.) Our only income has been social security disability, which really doesn't stretch that far, especially if you are still making payments on your house and have high medical bills.
Long story short—went through all our savings (I'd like to talk to somebody about "spousal impoverishment"!) in the last decade, refinanced the house to lower the payments so we could stay here, ran up charge accounts. We have been very, very frugal (our biggest expense has been for doctors and prescriptions), but even while we were doing without practically everything, I kept saying "at least we still have the roof over our head".
Now for the big surprise. We are going to have to declare bankruptcy, because we can no longer make the payments on our credit card. I found out that since we have some equity in our home, which is nowhere near paid off, the bank that issued our credit card can take our home to pay the debt. Do I sound incredibly stupid when I say that I did not know this? So now shortly we will no longer have that roof over our head.
In addition to everything else that I was already doing, now I have to start packing and trying to find a place to live. I do not even know how much longer we be able to live in our home. I feel like my head is about to explode. For all I know, it will.
Yes, I have already been to an attorney, and he is the one who educated me on what will happen. I thought I would share this information in case the bankruptcy laws are the same in other states, and somebody else might be close to that point—because like I said, I certainly never thought this could happen. Seems like every day on this journey is a new adventure, or maybe I should say a new nightmare.
Rachel while there is nothing I can do to help you I can join the outrage about this disease that won't quit until it takes everything from us. I am so sorry.
Rachel, I am so very sorry. Bankruptcy laws are different in different states, but to my knowledge, credit card debt is UNSECURED; therefore, I don't see how they could "take your house". Of course, I'm not an attorney, just thinking out loud.
And, your mortgage company/bank would be first in line and would have to be paid first - before the credit card. Would your mortgage company/bank give you a home equity loan to pay off the credit card?
God bless you - and all of us. This disease stinks.
Rachel T---Get another opinion. This is Federal Banklruptcy law involved. I don't know what state you're in but certain items which are collateral backed --like house or car debt ar handled diferently from other debt. In Chapter 7 Bankruptcy, after the bankruptcy is approved, you have to REAFIRM the house and/or car debt. All other are dismissed unless you go back and reafirm them (not smart). You are then still responsible for the reaffirmed debts.
Bankruptcy is nothing to be ashamed of. It is a relief process for people like us , who have come to this financial point through no fault of our own. We didn't charge trips, and max out cards to live HIGH.
Rules may be different for Chapter 13 or Chapter 11, but Chapter 7 gets you out from under and then you can get back on your feet. Yes, I did include myself--been there--done it twice--20+ years apart--same reason.
I don't know about your state, but here in California lots of people have been staying in their homes and not making the payments and just letting the bank take them over. In fact it was just such a case on the house we purchased several months ago. It was a super deal for us but very sad for the young couple with two children who lost their dream home. It could take months for the bank to take your house and if you know in advance you might want to consider not making the payments and using the house payments to keep your credit cards at off your back. Or...maybe you are thinking of selling your house. My heart goes out to you. You might want to check with some governmental social worker and see if their might be other solution. I don't understand why you are having to pay high medical bills...aren't these covered by some government agency when your income is so limited??
i agree with the others. credit card debt is unsecured debt and the creditors who hold first lein, aka your mortgage co or bank would have first dibs on those funds from the sale of your home. i also thought that in bankruptcy you get to keep your home and one car without losing those. i know folks who credit card debt was dismissed with bankruptcy and they kept their house and car. i think i would check with your mortagage co and se eif you can get a home equity loan to pay off the credit debt like vickie suggested before filing bankruptcy over credit cards. i am so sorry you are in such dispair over the situation. the disease takes all indeed. maybe you could refinance your h ome to lesser payments and use the money to pay off debt. check around before doing anything hasty. and filing bankruptcy surely under these circumstances is nothing to be ashamed of. its how we must survive sometimes. good luck. divvi
I was told both times-- under the old bankruptcy laws, and under the new revised ones--that the secured debt cannot be touched in a bankruptcy. They have to be on record and reaffirmed at the end of the process, but those items cannot be claimed against. Assets which are free and clear can be claimed to settle debts.
Rachel, I've been googling and looking. Please, please, get another opinion from another attorney. Something isn't right here. I know many who have kept their home, car, personal belongings,etc. Please check further.
Rachel, NEVER BE EMBARRASSED TO SHARE WHAT IS REAL! I have just completed Debt Consolidation. Not sure I will be able to keep up the payments. I was told that because I used some of Jim's Life Insurance money to repay my Mother, it is considered giving away money and frowned upon by the courts. Well, I'm going to try and hang in for 6 months and then file for bankruptcy. Here in Maine, they CANNOT TAKE OUR HOME, we can have 1 car. I also found out that as long as you are making some sort of payment ($5 - $10) a month on each dr bill, it cannot be held against you on your credit report. I also was able to reduce our Mortgage Interest with Obama's new program. My bank did all the worse and I lowered my interest rate down to the point where I am paying $350 less each month. Don't give up yet. There is a lot of help out there. Most Cities/towns even have emergency funds, and you can get property taxes lowered for Veterens or the Disabled. Check Elder Services, I just found a program that will clean my furnace, do an Energy Audit and maybe even help me pay for new appliances! Then there is fuel assistance and food stamps. YOU ARE NOT ALONE, MY FRIEND. KEEP Posting, go online to your state gov website and keep looking. Arms around, Susan
You need to go to an attorney who specializes in bankruptcy and nothing else. You do not need to lose your house, but take it from one who knows - it is sometimes better to rent than be saddled with taxes, home maintenance, and every other expense related to owning a house. I have absolutely no regrets about moving to the Independent Living Villa that I rent, not own. I pay one monthly fee, and everything is covered. But if you do want to stay in your house, it can be worked out. Please find a Bankruptcy Attorney with a lot of experience.
Agree with the above.We have filed bankruptcy twice - also 20 years apart. You can keep your house and 1 car and anything else you do not want to include - you just have to reaffirm and make sure the company does it before you go to court. We reaffirmed the loan on our motorhome but Wells Fargo did not process the paperwork. It took me 3 years to get someone to admit the paperwork is right there in our file and that it was their fault it was not processed. As a result they list us as bankrupting out the loan for our home which is a motorhome. When asked if we bankrupted it out then why are we still living in it and making the payments - they just laugh. Remember,when you file bankruptcy you do not have to include everything. When we filed the first time we only did debt from our business - kept the auto and credit card.
But it sounds like you need to do everything. As Joan said, you might want to consider selling the house and renting. there are advantages to both owning and renting though. Whatever - consult another attorney that specializes in bankruptcy.
Charlotte, your explanation is right on the target. We filed bankruptcy regarding a business and we did exactly as you describe, without the paperwork issue on your home.
PLEASE, anonymous person, get another lawyer. There is NO WAY your mortgage holder will allow an unsecured credit card debt to usurp their 1st position. And it is true, bankruptcy sux, but you can get the unsecured debt out from under you and start fresh with no debt other than your home and car.
I, too, am struggling to hold my head up and I am counting out the months til i can file again.(Jan 2011) I am keeping the credit card wolves at bay for now, but who knows how long 50.00 a month will hold them off. I took a 12K a year pay cut to get a job more conducive to keeping my DH at home with me, and the debt load that was once reasonable, is now overwhelming. I work in banking and not a day goes by that i don't see an account garnished by these credit card companies and I pray I am not next. I have been told by a bankruptcy atty to call asap if it does and he will help. Maybe chapter 13 instead of 7.
This disease destroys everything in it's path and it bankrupts you emotionally, physically, spiritually, financally and leaves all of us flattened. I feel no shame. Those that walk in my shoes understand. (all of you)
I really hope you get another lawyer..that one is a sham.
Yes, the credit card is an unsecured loan, BUT..… The equity in the house is considered a resource or an asset. In bankruptcy you are allowed assets (of any kind) only up to a certain amount. Even though the credit card debt is an unsecured loan, they are allowed to recover what they can from our assets. The law is that we are entitled to keep $17,600 of equity in our house, and if the credit card company can sell the house and clear more than what the mortgage is (yes, the bank who holds our mortgage gets paid first in any case) and the $17,600 we are allowed to keep, they are allowed to do that. (If both our names were on the deed, we could keep two times the $17,600, but we followed past legal advice for Medicaid and took DH's name off the deed to the house and the title to the car.) If we only had a little equity, it would not be worth the credit card company's time to take our house, and we could keep it. Unfortunately, we do have enough equity to make it attractive to them. If we had enough resources to pay off what the credit card company could claim, then we could also keep the house. If we had that much money, though, we wouldn't be declaring bankruptcy in the first place!
The cash limit that each of us can keep is $300. (Isn't that unbelievable?) I think maybe in the 1950's that would have been a decent amount, but in 2010, that really is bankrupting yourself.
Another law firm gave me the same information. I also researched this online and came up with the same answers. The first attorney who told me this has been in a practice which does only bankruptcies for 14 years. So it looks like we are sunk.
I do thank everybody for their support. It made such a difference to me just to be able to say what was going on here. I keep thinking about not only losing our home, but what effect this will have on DH. I can't even imagine what it will be like when people start coming through to look at the house. Half the time now he is in bed. Do I just let them tour through the house with him asleep in bed? And how in the world do I add all the work for a move to what I am already doing? I feel like I could use a large amount of an alcoholic beverage right now, and I don't even drink!
That is rough rough news for many of us. I had no idea you could be forced to sell your home. What would the alternative be to bankruptcy? I dont know your financial condition, but what would happen if you just let the creditors sue? Would it still trigger forced sale of your home?
I be keeping you closely in my thoughts and prayers.
I support you being annomous on the web. If you put it out there, anyone would find out and you may not want that. On the onther hand, going through what you are going through now has got to be very difficult. I'm thankful I am not going through it but my heart goes out to you. Getting an attorney like you have seems to be the right thing to do. Have you tried an elder care attorney to determine what you can do to get your husband taken care of, outside of the bankrupcy?
Dearest Rachel....don't be embarrased. I am the original OPEN BOOK about my goings on. I really empathize with you. Living with uncertainty of this kind takes a great toll. Just get the best advice you can. Seems like you've already had advice from an Elder Law attorney in the past. Me too. BUT, have found that not everything has turned out in the way it should for me. Living day to day with the help of neighbors and my parents, thank God. This is a wretched way to try and live. We DESERVE better, and I'm going to overcome this crap. You will, too.
Rachel, are the facts you stated for your state for a Chapter 7 bankruptcy? What about a Chapter 13, where you pay people back at a very low rate based upon income? Wouldn't that allow you to keep your assets?
You must live in a state that doesn't have homestead rights, which entitles you to keep the house, even in Chapter 7 bankruptcy. Without bankruptcy, IF the credit card company gets a judgment against you, they could garnish your bank accounts and salaries if you work.
There has to be some way of protecting your home.
CHAPTER 13 straight off the internet:
Chapter 13 offers individuals a number of advantages over liquidation under chapter 7. Perhaps most significantly, chapter 13 offers individuals an opportunity to save their homes from foreclosure. By filing under this chapter, individuals can stop foreclosure proceedings and may cure delinquent mortgage payments over time. Nevertheless, they must still make all mortgage payments that come due during the chapter 13 plan on time. Another advantage of chapter 13 is that it allows individuals to reschedule secured debts (other than a mortgage for their primary residence) and extend them over the life of the chapter 13 plan. Doing this may lower the payments. Chapter 13 also has a special provision that protects third parties who are liable with the debtor on "consumer debts." This provision may protect co-signers. Finally, chapter 13 acts like a consolidation loan under which the individual makes the plan payments to a chapter 13 trustee who then distributes payments to creditors. Individuals will have no direct contact with creditors while under chapter 13 protection.
How Chapter 13 Works A chapter 13 case begins by filing a petition with the bankruptcy court serving the area where the debtor has a domicile or residence. Unless the court orders otherwise, the debtor must also file with the court: (1) schedules of assets and liabilities; (2) a schedule of current income and expenditures; (3) a schedule of executory contracts and unexpired leases; and (4) a statement of financial affairs. Fed. R. Bankr. P. 1007(b). The debtor must also file a certificate of credit counseling and a copy of any debt repayment plan developed through credit counseling; evidence of payment from employers, if any, received 60 days before filing; a statement of monthly net income and any anticipated increase in income or expenses after filing; and a record of any interest the debtor has in federal or state qualified education or tuition accounts. 11 U.S.C. § 521. The debtor must provide the chapter 13 case trustee with a copy of the tax return or transcripts for the most recent tax year as well as tax returns filed during the case (including tax returns for prior years that had not been filed when the case began). Id. A husband and wife may file a joint petition or individual petitions. 11 U.S.C. § 302(a). (The Official Forms may be purchased at legal stationery stores or downloaded from the Internet at www.uscourts.gov/bkforms/index.html. They are not available from the court.)
The courts must charge a $235 case filing fee and a $39 miscellaneous administrative fee. Normally the fees must be paid to the clerk of the court upon filing. With the court's permission, however, they may be paid in installments. 28 U.S.C. § 1930(a); Fed. R. Bankr. P. 1006(b); Bankruptcy Court Miscellaneous Fee Schedule, Item 8. The number of installments is limited to four, and the debtor must make the final installment no later than 120 days after filing the petition. Fed. R. Bankr. P. 1006(b). For cause shown, the court may extend the time of any installment, as long as the last installment is paid no later than 180 days after filing the petition. Id. The debtor may also pay the $39 administrative fee in installments. If a joint petition is filed, only one filing fee and one administrative fee are charged. Debtors should be aware that failure to pay these fees may result in dismissal of the case. 11 U.S.C. § 1307(c)(2).
In order to complete the Official Bankruptcy Forms that make up the petition, statement of financial affairs, and schedules, the debtor must compile the following information:
A list of all creditors and the amounts and nature of their claims; The source, amount, and frequency of the debtor's income; A list of all of the debtor's property; and A detailed list of the debtor's monthly living expenses, i.e., food, clothing, shelter, utilities, taxes, transportation, medicine, etc. Married individuals must gather this information for their spouse regardless of whether they are filing a joint petition, separate individual petitions, or even if only one spouse is filing. In a situation where only one spouse files, the income and expenses of the non-filing spouse is required so that the court, the trustee and creditors can evaluate the household's financial position.
When an individual files a chapter 13 petition, an impartial trustee is appointed to administer the case. 11 U.S.C. § 1302. In some districts, the U.S. trustee or bankruptcy administrator (2) appoints a standing trustee to serve in all chapter 13 cases. 28 U.S.C. § 586(b). The chapter 13 trustee both evaluates the case and serves as a disbursing agent, collecting payments from the debtor and making distributions to creditors. 11 U.S.C. § 1302(b).
Filing the petition under chapter 13 "automatically stays" (stops) most collection actions against the debtor or the debtor's property. 11 U.S.C. § 362. Filing the petition does not, however, stay certain types of actions listed under 11 U.S.C. § 362(b), and the stay may be effective only for a short time in some situations. The stay arises by operation of law and requires no judicial action. As long as the stay is in effect, creditors generally may not initiate or continue lawsuits, wage garnishments, or even make telephone calls demanding payments. The bankruptcy clerk gives notice of the bankruptcy case to all creditors whose names and addresses are provided by the debtor.
Chapter 13 also contains a special automatic stay provision that protects co-debtors. Unless the bankruptcy court authorizes otherwise, a creditor may not seek to collect a "consumer debt" from any individual who is liable along with the debtor. 11 U.S.C. § 1301(a). Consumer debts are those incurred by an individual primarily for a personal, family, or household purpose. 11 U.S.C. § 101(8).
Individuals may use a chapter 13 proceeding to save their home from foreclosure. The automatic stay stops the foreclosure proceeding as soon as the individual files the chapter 13 petition. The individual may then bring the past-due payments current over a reasonable period of time. Nevertheless, the debtor may still lose the home if the mortgage company completes the foreclosure sale under state law before the debtor files the petition. 11 U.S.C. § 1322(c). The debtor may also lose the home if he or she fails to make the regular mortgage payments that come due after the chapter 13 filing.
Between 20 and 50 days after the debtor files the chapter 13 petition, the chapter 13 trustee will hold a meeting of creditors. If the U.S. trustee or bankruptcy administrator schedules the meeting at a place that does not have regular U.S. trustee or bankruptcy administrator staffing, the meeting may be held no more than 60 days after the debtor files. Fed. R. Bankr. P. 2003(a). During this meeting, the trustee places the debtor under oath, and both the trustee and creditors may ask questions. The debtor must attend the meeting and answer questions regarding his or her financial affairs and the proposed terms of the plan.11 U.S.C. § 343. If a husband and wife file a joint petition, they both must attend the creditors' meeting and answer questions. In order to preserve their independent judgment, bankruptcy judges are prohibited from attending the creditors' meeting. 11 U.S.C. § 341(c). The parties typically resolve problems with the plan either during or shortly after the creditors' meeting. Generally, the debtor can avoid problems by making sure that the petition and plan are complete and accurate, and by consulting with the trustee prior to the meeting.
In a chapter 13 case, to participate in distributions from the bankruptcy estate, unsecured creditors must file their claims with the court within 90 days after the first date set for the meeting of creditors. Fed. R. Bankr. P. 3002(c). A governmental unit, however, has 180 days from the date the case is filed file a proof of claim.11 U.S.C. § 502(b)(9).
After the meeting of creditors, the debtor, the chapter 13 trustee, and those creditors who wish to attend will come to court for a hearing on the debtor's chapter 13 repayment plan.
I sort of see what she is saying now. And, her state may not have homestead exemption, or if so, it may be very low. So, if she has a lot of equity in her home, that equity is an asset, along with other assets she may have. The credit card company knows this and may go after the assets she has through the bankruptcy. I still think I would try to get a home equity loan and pay the credit card debt off. Once you have the loan ready to close - then negotiate with the credit card company to take less than you owe.
Dear friends...be careful about settling medical and credit card debt for less than you owe. The difference is considered unearned income and therefore taxable.
Rachel T. I don't have any advice, but, I think you have some good suggestions here. I would only like to add that I am sorry you are having to go thru this and please don't be embarrased or ashamed. Anyone of us can or might be in your same situation before this is over.
cs...WHAAAA?? I was wondering how that all worked. Just had a conversation with my neighbor about all the advertising we see about adjusting credit card debt and home mortgage payments. hmmmmmm