Expert: Terry Leeders - 9/26/2008

Question
DEAR MR. LEEDERS,
I NEED SOME ADVICE ABOUT FILING CHAPTER 7 BANKRUPTCY.
IN BRIEF, THESE ARE THE PERTINENT FACTS:

I AM A RETIRED LAS VEGAS SCHOOL TEACHER WITH A YEARLY SALARY OF $45,797 BEFORE TAXES.  THAT AMOUNTS TO ROUGHLY $3,500 A MONTH AFTER TAXES.

I OWE $78,000 IN CREDIT CARD OBLIGATIONS, TO SILVER STATE SCHOOLS CREDIT UNION, BANK OF AMERICA AND CHASE.
THE MINIMUM PAYMENT ON THESE CARDS TOTALS $1,800 A MONTH.

MY DAUGHTER AND I ARE JOINT OWNERS OF A HOME IN LAS VEGAS AND WE DIVIDE A MONTHLY PAYMENT OF ABOUT $2,500.  TOGETHER WE SIGNED FOR LOANS FROM CITIBANK MORTGAGE TOTALLING $325,000 IN FEBRUARY OF 2006.  WE STILL OWE ABOUT $316,000 ON THE LOAN BUT THE HOUSE IS NOW WORTH ABOUT $275,000.

I AM CONSTANTLY BORROWING MONEY FROM MY CREDIT CARDS BUT I CANNOT KEEP ON THIS WAY.  I DO NOT SEE A WAY TO SURVIVE WITH THESE HUGE DEBTS.  MY DAUGHTER AND I THOUGHT THE HOUSE WAS A GREAT INVESTMENT AND THAT IT WOULD APPRECIATE IN VALUE.   BUT IT HAS TURNED INTO A FINANCIAL NIGHTMARE.  CAN I FILE FOR CHAPTER 7 BANKRUPTCY?

I WOULD LIKE YOUR ADVICE ALSO ON THE HOUSE SITUATION.  DO YOU RECOMMEND THAT WE GO INTO FORECLOSURE?
IF SO,  DO YOU RECOMMEND THAT I WAIT TO START BANKRUPTCY PROCEEDINGS UNTIL THE HOUSE ISSUE IS SETTLED?
IS THERE ANY SIGNIFICANT GOVERNMENT PROGRAM THAT WOULD HELP US OUT?

THANK YOU SO MUCH FOR YOUR HELP.
CINDY

Answer
I only practice law in IL so you should seek out a local bankruptcy attorney to see about your budget and the local means test bankruptcy budget analysis.

As a cosigner, your daughter will owe for the home if you discharge it in bankruptcy.  So you need to discuss the case with her, so she is aware of the situation and her responsibilities if you file and let it foreclose.

Normally consumer debts can be discharged in Chapter 7.
You need to watch out for recent usage on the credit cards, so ask a local bankruptcy attorney on the best time to file the case to avoid any objections.