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Bankruptcy Law/Bankruptcy vs. incomes earned and options!
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Question
My wife makes @$150-$200K and has about $60K in debt. I make @$125-$150 and have right at $40K in debt and her carloan in my name around $25K. With a 1st and 2nd mortgage +4 kids, we are only able to erode the debt down by about $10K per every 6 months(better than nothing). We just got slammed with a $10K tax bill too thanks to AMT. Is bankruptcy even an option for us or who should we see? I understand it is much more strict these days and a lot of it is based on your income,not so much the debt. We run very lean every month and it seems that we still can't chunk away at the overall nut.
I know, it's very frustrating! However, you are actually handling things very well, all things considered.
With your income, I'm sure the court,(as you suspected) will not let you wipe out the debts with a Chapter 7, but I think you could obtain fantastic relief with a Chapter 13, where you pay back what you owe, in monthly payments spread out over as long as 60 months. The beauty of this is that you probably won't have to pay any more interest on the taxes and credit cards! That way, the money you pay on them really knocks down the debt, and you will quickly see the progress that you are making.
Another option which I assume you have already looked into is to refi the house and pay off your debts.
In a Chapter 13, your minimum payment can probably be as low as $2000 per month, depending on your normal living expenses, for 60 months. I expect that is much less than you pay now. Just to have something to compare against a Chapter 13, run an amortization on your total credit card and tax debt based on the average minimum payments and average interest rate that are required, and see whether you would ever pay this off during your life expectancy!
The key to a successful 13 is to have the best possible legal represntation, otherwise it can be a nightmare instead of a dream. One way or another, I'm certain you will get on top of this. Good luck.
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Answers by Expert:
Los Angeles Bankruptcy Lawyer Leon D. Bayer
Expertise
Leon Bayer has successfully represented clients in bankruptcy for over 30 years. He is frequently called upon by the media, the California Bar and other associations to provide insight and help educate attorneys on bankruptcy issues. If you or other readers want to keep up with my blog postings about life in and out of bankruptcy, you can follow my blog at http://www.bankruptcyblogger.org/ and my personal web site at http://www.debt-relief-bankruptcy.com and A Human Guide to Bankruptcy at http://www.thebankruptcyguide.net/ Leon also writes about bankruptcy law for Nolo, see http://www.nolo.com/law-authors/leon-bayer.html and his "Ask Leon" bankruptcy law blog column at http://blog.nolo.com/bankruptcy/
Experience
Leon is a Certified Specialist in Bankruptcy Law by the State Bar of California, and has been a practicing bankruptcy lawyer in Los Angeles, California for 33 years.
Organizations
National Association of Consumer Bankruptcy Lawyers, California Bar Association, Los Angeles County Bar Association.
Publications
Author, ?The Essentials Of Chapter 13,? Daily Journal Report, December 18, 1987.
Contributing Editor, Basic Bankruptcy, California Practice Handbook, Matthew Bender 1992, 1993.
CEB Consultant, CEB-Personal and Small Business Bankruptcy Practice in California, 2003.
Education/Credentials
B.A., J.D.
Awards and Honors
President, 1995-1996-Los Angeles Bankruptcy Forum; Member - Los Angeles County Bar Association Committee on Commercial Law & Bankruptcy, 1988. Law Advisory
Commission-Personal & Small Business Bankruptcy Law of the State Bar of California, 1996-2000
MR. BAYER SAYS: The big banks and credit card companys have been working overtime for many years to undermine the Consitutional right of the American people to be able to claim bankruptcy protection. In 2005 the banking lobby successfully convinced Congress and the President to make the laws and proceedures more complicated, hopeing that it will stymie legitimate people from filing bankruptcy. They succeeded in gaining these complex new legal proceedures by greasing the legislative system with hundreds of millions of dollars in "campaign contributions." The good news for the American people is that while the new laws have made the proceedures needlessly complex to the point where inexperienced people can't help but trip over the maze of new rules and regulations, the process is still doable, especially with a lawyer who is well trained and experienced in this specialty.
Past/Present Clients
I have probably handled something on the order of about 15,000 bankruptcy cases thropughout my career.
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