OPTIONS other than bankruptcy?

[D Eckerman]

client can't make house payments due to ARM @ 11%

credit cards high and paying mostly interest only

Atty advised bankruptcy on credit cards as only option

is that the way to go?

any ideas, comments

[jainen]

>>Atty advised bankruptcy on credit cards as only option<

I presume you are not posing this as a tax question.

Naturally if you ask an attorney, he will advise a solution that produces a large attorney fee. Bankruptcy can be useful, but it also has a lot of problems so he should get another opinion on that. Even with bankruptcy, there are some alternative approaches.

Under current law it's pretty hard for a wage earner to discharge consumer debt in bankruptcy. Certainly the credit card companies will object if he tries to keep his home. He can ask a credit counselor to renegotiate his debts--it costs about the same as a bankruptcy and I suppose has about the same possibility of success. There is nothing against him dealing directly with his creditors himself, knowing that the mortgage company definitely does not want a default or foreclosure and the credit card companies have no security whatsoever.

Don't assume that he has exhausted the possibilities of a new or second job. There are undoubtedly things he hasn't thought of.

All these ideas are based on him keeping on keeping on. Another traditional solution is to just walk away from it all.

[D Eckerman]

why under current law is it hard to discharge consumer debt?

Atty says... can keep your house and rental and vehicle, just get rid of credit cards...

2nd job - she has 2, they are split up now, he has 2 - gambling and a good paying job...

so is the atty lying? what organization has proven to be reliable to help people decide?

Thx

[redux]

Naturally if you ask an attorney, he will advise a solution that produces a large attorney fee.

A statement such as the one above about an attorney's motive is akin to saying that ALL tax preparers are only interested in charging large fees and don't care about their clients, just their fee.

Obviously, neither statement is true, so without implying, or agreeing with the previous poster that all attorneys are corrupt, there probably is some merit to the suggestion of getting a second opinion.

Yes, the bankruptcy laws have changed substantially, and complete debt forgiveness is no longer an option, based on what little I know about it.

The worse thing a person deeply in debt can do is to believe that the situation is hopeless. The next worse thing they can do is to remain quiet and not discuss their situation with the creditors. Most always, the creditors are not happy that the accounts cannot be paid as agreed, but are willing to discuss the situation and to arrange some formal payment plan which may exclude turning the account over to a collection agency.

Banks, and mortgage companies DO NOT want the property, they want payment. If the previous terms of payment are impossible to meet, many times they, the creditors, will work with the debtor to arrive at a payment schedule that will work for all concerned.

I would try this approach first.

[jainen]

>>agreeing with the previous poster that all attorneys are corrupt<<

I don't mean to imply that attorneys are corrupt. But if you ask an attorney for a professional solution, you will get an attorney's professional solution. That is more likely to involve the attorney working as a legal professional, than, for example, the attorney suggesting a social resolution like my idea of leaving town. And when attorneys work as a professional, they charge a fee.

Of course the attorney is not lying. He has examined the facts and circumstances (which I have not) and given his opinion. He is perfectly aware that the previous Congress took away a lot of the debtor's rights in bankruptcy, especially concerning credit cards, and no doubt expects that filing bankruptcy will lead to the kind of negotiations that we mentioned.

[Eli]

http://www.msnbc.msn.com/id/18184371/

http://www.msnbc.msn.com/id/17949352/

Darlene, check out these articles maybe they can be of some use to your client.

Eli

[kcjenkins]

I don't mean to imply that attorneys are corrupt. But if you ask an attorney for a professional solution, you will get an attorney's professional solution. That is more likely to involve the attorney working as a legal professional, than, for example, the attorney suggesting a social resolution like my idea of leaving town. And when attorneys work as a professional, they charge a fee.

Of course the attorney is not lying. He has examined the facts and circumstances (which I have not) and given his opinion. He is perfectly aware that the previous Congress took away a lot of the debtor's rights in bankruptcy, especially concerning credit cards, and no doubt expects that filing bankruptcy will lead to the kind of negotiations that we mentioned.

I do not think that 'leaving town' is any kind of resolution, Jainen. His obligation will follow him, and only get worse. I do agree that counseling is called for, but under the new bankruptcy laws, that is the first step before you can file. And it is done by a licensed councilor, not the attorney. So the attorney was actually giving very good advice, whether it ends up being filed or not.

An obvious first alternative is to sell the house, since clearly they bought more house than they could afford, which is why they went for an ARM instead of a fixed rate mortgage. I hate those things, they cause more problems than almost any other issue. But when a couple is overspending like this one, [living off credit cards is automatically 'overspending'], they may be in too deep to get out without the help of the bankruptcy court.

[jainen]

>>clearly they bought more house than they could afford<<

Nothing in the original post suggests that this was a purchase mortgage. My guess is that they refinanced against rising property values, probably to support their plastic lifestyle and the gambling. Even with a purchase, you may have noticed that aren't still going up. Besides the problem of teaser rates expiring, a lot of homeowners are discovering that leverage works against them as property values drop. Not only are they ineligible for a refinance, they can't sell either.

As for the cut-and-run strategy, it isn't pleasant but it can be successful. Credit counseling and bankruptcy aren't pleasant either, and often fail after dragging the debtor down even further. If they are going to lose their home and job anyway, a strategic retreat might very well be the best answer. You see it all the time in family matters, and often enough in financial straits. A great many people have the ability to run away from their troubles. A great many.