This past week we met with a bankruptcy attorney to get the process started. The lawyer had emailed us a 25-page worksheet to complete before our meeting. Thankfully a lot of it was not applicable to us (questions about prior bankruptcies, judgments, etc.), but even so, it took a couple of hours to round up all the info we needed and fill in all the blanks. Schedule D was particularly weird because we had to inventory and then assign a dollar value to all of our household possessions. They won’t be taken and sold in a Chapter 13, but they need to be sure we aren’t over the limits for property in our state. Any value over the exemption amount will be calculated into the trustee payment amount – they need to offer creditors at least the amount they would receive in a Chapter 7.
As we expected, Chapter 13 is our only option because I am still working and earning a decent income — which is nowhere near enough to pay for all of our debt, but it’s enough to live on. The lawyer gave us a ballpark figure for the monthly payment to the trustee, but it is not yet carved in stone. After the case is filed, the attorney will meet with the trustee and work out the amount we need to pay back. I am not looking forward to what will likely be a five-year payment plan, which will also mean five years of having the government in our financial business. But if it means we can be completely debt-free in five years (except for my student loan), we decided that will be worth it.
The trustee payment amount is not based on the amount of debt, but on the amount we can afford to pay back and still survive. Priority debts are paid first — these are the debts you can’t discharge for any reason, such as student loans and child support. In our case, I’m not behind on my student loans so they will be paid outside the plan. After priority debts come secured debts, such as mortgage and car payments. We are giving up the mortgage but we are including the cars in the plan, just to keep things simple. Last on the list are unsecured debts, which are credit cards. If you can only afford to pay the first two types of debt, you can end up paying 0% of the unsecured debts, and the rest will be discharged after you successfully complete the plan. The attorney said this is what he will shoot for, but will probably end up with a compromise on a percentage of the unsecured debt. I am OK with any percentage as long as we can fit it into the budget. On one hand, we did incur the credit card debt with the intention of paying it off in full…on the other hand, paying 50% or 25% of that would save us a lot of money over the long term, and after the atrocious way some of these creditors have behaved (are you listening, Bank of America?) I’d like to pay them as little as possible. Considering that some creditors have already offered Tony settlement amounts of around 30%, I suspect we’ll end up somewhere in that neighborhood.
We are planning to file our case officially sometime in the next few weeks. Before we do, we have to complete an online credit and bankruptcy counseling course, and supply 3 months worth of pay stubs and a copy of our last tax return. I have read plenty of bankruptcy nightmares online, but our attorney has 20+ years of bankruptcy experience and he makes it sound pretty simple. If he can pull it off as relatively painlessly as it sounds, I will be really impressed.
In the meantime, we paid our full attorney’s fee up front, which is required in most bankruptcy cases. I am fine with this, because it means we can stop those awful fucking collection calls dead in their tracks. I am only two weeks behind on my credit card payments, I’ve never even missed one payment before, and one of my creditors (why yes, it is Bank of America) is calling me up to eight times a day from various numbers. Normally I’m at work when they call so I can’t talk to them, but I can’t wait for them to call me on a weekend or evening so I can refer them to our attorney. Tony has done this half a dozen times just in the last two days and he says it really works – one collector even ended the call by thanking him for shopping at their store. Even though we don’t have a case number yet, when we tell them it’s pending they are not allowed to call again for 30 days. By that time they should have received notification of the bankruptcy from the attorney’s office, and they can’t call us at all after that. Nice.
All of this continues to be an emotional roller coaster. Some days I feel relieved that we are filing bankruptcy, other days I’m ashamed or feel irresponsible — even though I know it is not our fault. I still wish we’d done this a year ago instead of burning through our savings and maxing out all those credit cards to keep up with the mortgage. The attorney reminded me that berating ourselves for decisions we’ve made in the past doesn’t do anyone any good; it’s how we handle the situation from now on that’s important. Five years is a long plan to complete, and many people don’t stick with it all the way to the end, but I think we will. The light at the end of the tunnel is imagining how amazing it will feel once we are completely out of debt.