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Bankruptcy vs Defaults Personal Bankruptcy

Discussion in 'Bankruptcy Law' started by NBrazil, Feb 28, 2015.

  1. NBrazil

    NBrazil Law Topic Starter New Member

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    Gentlemen,

    Medical expenses have wiped virtually all savings (including retirement account)... have maybe $5,000 left. This leaves me with about $30,000 in debt, mostly unsecured (although about $12,000 in a HELOC).

    After 3 months medical leave (which didn't help), I have attempted to return to work but I can tell that even though it is a computer desk job, I will not be able to continue very long (maybe a few months so I can get some critical medical tests while I have insurance).

    I will be 62 in 5 months so I will be eligible for Social Security early retirement. It isn't enough to live on, but close (with the aforementioned $5,000) enough that I would take it and file for social security disability (been informed I have a decent enough case). The advantage is that it would give me some cash flow while I await approval of the SSDI.

    Obviously I wouldn't be able to pay off the debt, and I have spoken with one lawyer that advises me to do Chapter 7 bankruptcy NOW (even though I am working). I am current on all bills.

    Another attorney advised me NOT to declare bankruptcy, no point, social security cannot be touched and I have no real assets (maybe $10,000 equity in Condominium) - so he said just simply default on every bill (obviously keep paying mortgage and condo fees), the net effect is the same - sure, they can sue me, but you can't get blood from a stone - change phone number and just continue on with my life.

    Please note that many of my credit cards have a zero balance so there would be nothing to default on, but my two "low interest" ones carry the majority of the debt (again, mostly medical) - and I'm still charging (more medical stuff).

    It feels fishy to me to just default and bear it - seems that bankruptcy would give me a legal basis to be left alone. On the other hand, defaulting on 3 credit cards (only) is appealing, but I don't know if it is better. My car is paid for (and worth $6,000), but I need to keep it. Is the argument that since I would have virtually nothing to use as an asset and only social security for an income a valid one to rule out bankruptcy vs defaulting?

    Thanks for any input. I have to decide soon because I probably won't be able to work more than 6 months more.
     
  2. army judge

    army judge Super Moderator

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    There's no shame in filing for bankruptcy.
    Bankruptcy allows a person a fresh start.
    In your predicament, brother, you could use a second chance.
    I'd file for disability.
    If you get it, it'll be what you would have received had you retired at 66, 67; or your full retirement age.
    Meanwhile,I'd do the BK.
    I wish you the best, financially and physically.
     
  3. disagreeable

    disagreeable Well-Known Member

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    You are aware SSDI would only cover the spread between the 62 retirement amount and full retirement age of 67. Assuming you are approved.
     
    Last edited: Mar 1, 2015
  4. NBrazil

    NBrazil Law Topic Starter New Member

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    Yes, I am aware of that. I'm also aware that in my particular circumstances (taking early retirement because of medical issues) I can collect early retirement while applying for disability which, when approved, takes me to that amount at age 67. It will have to do. I originally planned to work to 70 and have a small amount to add (maybe $75,000), but that has been more than wiped out. So it is what it is.

    So it is inevitable, as well as the bankruptcy - the only variable is when.
     
  5. army judge

    army judge Super Moderator

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    The sooner you begin, the sooner it will end.
    No need to delay, especially if your health is fragile.
    BK will allow you to forget money issues and focus on getting better.
    Good luck.
     
  6. despritfreya

    despritfreya Active Member

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    This IS the advice I give many potential clients if their only source of income is SS and/or SSDI and one has no assets that can be seized once a judgment has been obtained. If you meet these qualifications you are "judgment proof" and the judgment is not worth the paper it is printed on. The disadvantage to this is potentially dealing with the harassing collection efforts. If you are thick-skinned then ok. If not, do the bk. Remember, do it now and it won't be available down the road. If you wait, it will be available if and when you really need it.

    Des.
     
  7. Michael Wechsler

    Michael Wechsler Administrator Staff Member

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    The other disadvantage comes should you ever find yourself coming into any type of money, e.g. inheritance, etc. Something to consider if this is a possibility as that would not be discharged and bankruptcy isn't going to help you at that point.
     
  8. NBrazil

    NBrazil Law Topic Starter New Member

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    Inheritance is a possibility in the future, and frankly even if it happened tomorrow, I would be happy to pay off the debts (that is about how much it would cover).

    Okay, glad to hear from despritfreya that it actually IS a legitimate strategy in some cases (like mine). Not thick skinned enough anymore so guess I have to go the BK route. Now is a better time. Just feels so odd to initiate it when everything is current.
     
  9. Michael Wechsler

    Michael Wechsler Administrator Staff Member

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    It's a legitimate strategy although not to be considered without care. Decisions regarding bankruptcy and debt are usually difficult ones. Even if there may be a clear decision, it's trying to choose the lesser of two places you don't want to be. Good luck.
     
  10. NBrazil

    NBrazil Law Topic Starter New Member

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    Thanks for considering my questions. Have an appointment with a local attorney to get all my questions answered and hammer out the details in my particular situation (such as being current, what happens to checking accounts, auto insurance, the fact that I probably have surgery coming up in a month(!), and that most of my credit cards are at zero balance - the bulk of the debt is on 3 low interest cards and a HELOC... and I WILL have to retire within the year with only social security as an income). Fun.
     
  11. Betty3

    Betty3 Super Moderator

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    That's probably your best bet - talk to an attorney. Good luck to you.
     
  12. NBrazil

    NBrazil Law Topic Starter New Member

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    Son of a gun - after analyzing my particular situation, like another one, he did not recommend bankruptcy should the condition that is expected to put me in the financial crunch come about... and while an argument could be made to go ahead with it now (while I still have a job instead of SS only), in the end, defaulting would result in a better outcome (both destroy credit ratings of course). Logical arguments where laid out and legal consequences, and bankruptcy would result in a messier, worse outcome. Son of a gun.

    Well, I have the option of doing it slowly and suddenly as my situation develops (or doesn't). Hard to plan when you don't know for certain if you will be working or living on SS only within 6 months... nor if a proposed medical procedure will rid you of many of the issues causing you to have to stop working and seek out disability.

    Hard to be responsible when the pendulum could range from dire to okay. What it means is I don't have to do anything until I know... and also learned the critical stuff NOT to do regardless (i.e. treat all debt the same - if I take my tax refund and pay off a larger debt and then need to file in two months, that does not play well I learned, for instance - my penchant for wanting to pay off those that I can would harm me in this case - best to treat all the same, i.e. minimum payments or NO payments, sigh).

    The law, go figure!
     
  13. Betty3

    Betty3 Super Moderator

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    It's hard to know what to do sometimes. I guess your best bet is to go with what your lawyer recommends. Good luck.
     
  14. cromwellca

    cromwellca Banned

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    Indeed.. I hope you're fine now
     
  15. NBrazil

    NBrazil Law Topic Starter New Member

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    Things have gotten ugly. I had planned to file in August and avoided using my charge cards but before I could do so, emergency home and car repairs prevented that, had to charge thousands. But I'm still working so I hope to soldier through and work as long as possible, but now 90 days out is November and some rather LARGE medical bills have hit me - you know, the kind that takes 6 months to work through the system.

    So I just sent a check in for what I could on the first (the second just hit me today) and already with the phone messages have started. Is it true that as long as one makes a good faith payment it won't go to collections?

    My bottom line is that on top of the previous debts I now have an additional $4,000. I am current and would be able to remain current if not for these "pay us now" medical bills.

    Obviously if I have to stop working this is all "moot," but I'm trying to continue in order to keep my "insurance," but even if I do, I wouldn't be able to pay any typical bill other than an appointment.

    It is my understanding that all debts must be treated equally, so I cannot pick and choose among them - and this all or nothing approach will destroy me.

    So, to summarize: current with all debts (high FICO score), had to charge thousands due to unforeseen circumstances, still have major plumbing issues that must be fixed ASAP (have just enough money to do that and pay bankruptcy attorney), sudden medical bills from 6 months ago hitting which I cannot pay unless I charge them and continue to work - and it isn't known if I will be able to continue working due to poor health. The fan has been hit.

    If I stop paying everyone NOW, I'm still 90 days out from being able to file for bankruptcy... but is that how it kind of works? Stuff happens, you are overwhelmed, you stop paying and AFTER a few months of collection calls THEN you file? I've always been hyper-responsible so I don't understand any of this.
     
  16. army judge

    army judge Super Moderator

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    You can file bankruptcy tomorrow.
    Heck, you can fill out the forms tonight, and have them filed tomorrow.
    Search the 'net for "pro se chapter 7 bankruptcy filing or forms".
    It will cost you $335 to file, and you can request to pay the filing fee in installments.
    You don't need a lawyer, because you seem like a person with above average intelligence.
    The entire process can take anywhere from three to six hours.

    Filing will buy you time.

    You will need to complete the required "pre-bankruptcy counseling", but you can do that online. too.
    The cost of that class is cheap, about $25 to $35, give or take.
    Once you find out who provides the online filing forms, the pre-BK counseling will also be revealed.

    I suggest you forget that FICO score trap, and concern yourself with saving yourself.
    Thats aid, whatever you do is your call, as you are the BOSS of YOU!!!
     
  17. NBrazil

    NBrazil Law Topic Starter New Member

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    I freaked on earlier comment/reply, had a chance to think it through (and before your helpful comment, Army).

    For me what works best is as long as I'm working to make minimum payments and when I hit 90-days from last use of credit cards I can consider stopping paying (treating everyone the same) and starting the bk process… all that matters is figuring out what to do about the new medical bills and the urgent need to repair my condo's plumbing.

    Unless I'm quite mistaken, making any medical payment "counts" - so I could do small ones in the interim and have them call me all they like, blood from a stone thing.

    Stopping payment now to everyone has too dire a consequence with unstable health, unless I'm very mistaken. For example, I could be wrong in thinking that I would for the moment just accumulate the 30, 60, 90 day late flags on credit report with the consequences of FICO score dropping like a stone… but no immediate action other than that and a lot of phone calls?

    So, since I can file tomorrow - I will endeavor to choose my time. I want to understand this "buying time" aspect because, like I said, I have some things that HAVE to be done. But to do so while intending to file wouldn't sit well with a judge, I figure. Thanks.

    Saving myself is a bit complicated - easier if I can work, a bear if I can't. (Would need to file for SSDI while on SS).
     
  18. army judge

    army judge Super Moderator

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    You can't get the answers here that you can if you visit three or four local BK attorneys.
    You can meet with most BK attorneys at no charge for an initial assessment of your situation.
    After you've met with two or three lawyers, you'll better understand your rights.
    Nothing I've told you is a trick, illegal, or a scam.
    You just don't understand or comprehend what I've telling you.
    Such is the nature of this type of communication.
    It doesn't work well for complex matters.

    Many people file a BK, and upon reflection, they decide to have the filing dismissed.
    The time you buy is to keep the wolf from devouring you and your assets, time to reorganize, perhaps.
    BK works for General Motors, United Airlines, even municipalities (Detroit comes to mind), and maybe a territory (Puerto Rico)' so there's no shame in BK filings by Sam and Susie Citizen.
     

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