How to stop a friend from trying to make me file for bankruptcy

jen288December 29, 2005

I will try to make this as brief as possible.

I have about $15,000 in credit card debt that I'm having a really hard time paying (it's so bad some months I can't ford to send them anything). I own a home jointly, we are not married and both of our names are on the mortgage.

He had a car that was repossesed last year. He has since done nothing to rectify the situation. Meaning they will probably put a lein on the house.

My friend has it set in her head that the only way out is bankruptcy. I told her all I need to do is wait for my car to be paid off in March, PLEAD with the creditors, and re organize....I even contemplated going to a credit counselor.

I don't want to file for bankruptcy. And she keeps giving me all these scare tactics. She tells me I am going to lose my home because of his car debt.

Can they? Can they seriously take my house? I know they can place a lein on the property...but take it? Kick me out?

I may not be on track with my credit cards, but the mortgage is paid ON TIME, EVERY MONTH.

Is she crazy, or am I?

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Tell your friend she has overstepped her bounds and to stop mentioning your finances. Period. If she persists, cut her off til you figure out for yourself what is best, and take steps to move in that direction.

    Bookmark   December 29, 2005 at 3:32PM
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Is your partner paying part of the mortgage or are you paying the full amount owing? If you're paying the whole amount, unless the partner made a larger contribution toward the down payment, why is that person's name on the deed?

If the other person made a substantial portion of the downpayment and you're making most of the monthly mortgage it would be difficult to figure out how much of the current equity actually belongs to which, if you were to settle up on the best of terms.

If the full amount owing isn't fully paid every month, the people holding the mortgage could foreclose, resulting in the house being sold.

In most jurisdictions, whatever funds are left over after the sale is completed are paid to the former owners, i.e. the people who owned the house prior to the foreclosure.

But one wants to avoid that, for there are usually a whole raft of expensive items related to the foreclosure, advertising for sale, etc., etc. that eat up a good deal of what should have been the former owner's equity.

If foreclosure is threatened, it's often wiser to sell it yourself.

Is there a good reason for the partner having made no move to liquidate the debt owing due to the repossession of the vehicle? Or just low income, poor management of money, laziness or other alterable situation that could be improved if the operator chose. Is there any possibility that your co-owner will take some action toward paying off the bills owing on the car?

On what kind of credit cards are your credit bills owing?

If they are the regular kind of credit card, usually interest rate is about 15 - 18%, but usually store-issued credit cards charge something like 25 - 28%.

If you are carrying balances on store-issued cards, what's the possibility of paying at least part of them by making payments from bank-issued ones? That would, in most cases, reduce the interest charge that's being added monthly a substantial amount.

Do you have assets that could be used to make a loan at the bank or credit union?

I have a fully secured line of credit at the bank (unused at present) and asked the rate of interest that they'd charge on it if I were to draw on it now and they said 5%. Fully secured means that I've left with them enough assets that they can sell easily (stocks, bonds, mutual fund certificates, etc.) in the amount of $2,000. for every $1,000. that they'll allow me to borrow.

If you go to make a loan to buy a car, etc. at such a financial institution, using the car as collateral, etc., often the rate will run 10 - 12% - but that's somewhat lower than you're paying on regular credit cards, and likely less than half of the rate that you'd most likely be paying on store-issued cards.

Have you had any offers of credit cards charging 0 - 5% or so for a number of months, lately? It might be a good idea to check up on using one of them, but you might be turned down as a poor credit risk. Not a good idea to make a request for more than one, or at most two, for all of those requests show up on credit score and tend to reduce your rating (that's likely bad enough as it is).

However - these ideas arent really related to the question that you asked.

You are in charge of your life.

If you ask some other person for advice and they offer it, that's one thing.

If they try to push you into a certain course of action, don't forget - you are to be in charge of your own life.

You make certain decisons, then must deal with the consequences.

It's better to make plans so that you're in charge, rather than letting yourself get into a position where others are in charge and you're responding.

If the "advisor" offers unsolicited advice, it's often a good diea to pay less attention to it.

It might be valuable (then again, it might not be) - but the giver of the advice needs to be diplomatic about the amount of pressure that s/he exerts.

The rules about forcing a sale of an asset, especially an owner-occupied home vary from location to location and it would be a good idea if you can find out from knowledgeable freinds what the rules are in your area.

It would often be rather unusual for a lien-holder to be able to foreclose on a debt that is a small portion of the total value of the house, I think.

On the other hand, it would be a good idea for you to find out what consequences there might be if you were to go bankrupt, not only in terms of the costs to do it but also in the blot that it'll put on your credit record for many yers.

If you are considering credit counselling, check whether it's a non-profit or a profit-making enterprise. Many don't like using them, for they usually collect fees, which mean that the amount that you can pay creditors monthly is lower than at present.

On the other hand, it might be a good idea to contact one of the credit card issuers to ask whether they can reduce the interest rate, which they often do. If you make a deal to pay them a certain amount monthly, though, you need to try very hard to fulfill what you've promised.

If we can be of further help, you are welcome to it.

May I just say - that I dislike credit cards intensely.

Good wishes as you work through your problems.

ole joyful

    Bookmark   December 29, 2005 at 4:53PM
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I can't advise you on how to deal with the friend, other than to say something along the lines of "Thanks for your advice, but I don't think that's a path I want to take."

On the situation, though, you might look into whether your state has a homestead exemption. Basically this means that if you file a declaration of homestead with the relevant authority (probably the county clerk), then your equity in your house (up to a certain amount - I think it's around $300K here) is protected against any claims other than mortgage or unpaid taxes.

You didn't say what your equity situation is, but it might be possible to take out a 2nd mortgage, or refinance, to pay the credit card bills. 6% or so interest is a lot less than the 12-18% that credit cards charge. But don't do it unless you have the self-discipline not to go out and run up a new set of bills...

Personally, I love my credit card. It gives me 2% cash back on all purchases and I pay the bill in full every month, so I wind up making about $100 or so a year on it.

    Bookmark   December 29, 2005 at 10:25PM
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Thank you all for your kind advice.

I don't know where I stand as far as equity....but as a result of these credit card accounts (which mind you are closed) due to late payments etc....I probably won't be able to finance a loaf of bread.

The total amount of debt is roughly $15,000...which by todays standards, in my eyes, hardly justifys filing for bankruptcy.

I merely need to re-organize, budget and hop on the horn to see if I can make an arrangement with the creditors.

The thing that frustrates me about recieving advice from my friend is I get treated like I don't know what the he** I'm talking about.

I think that she is under the impression that all you do is file for bankruptcy and you are free and clear. Um, no...those days are gone.

The bankruptcy laws have changed as of October 1. If I undersatnd correctly you are required to see a credit counselor BEFORE YOU ARE EVEN ALLOWED TO FILE.

I guess what I need is some validation from people who know what they are talking about.

My house is at NO RISK of being forclosed. As I stated in my post I pay it ON TIME, EVERY TIME.

    Bookmark   December 30, 2005 at 9:19AM
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You are right about the new bankruptcy laws, and your friend is wrong. Not only do you have to do credit counseling first, but you also have to pay off all your credit cards--there's no 'debt forgiveness.' This was written into the law by the card companies.

Check out for advice on debt, refinancing, etc.

Here is a link that might be useful:

    Bookmark   December 30, 2005 at 11:59AM
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Jen, the only advice I'll offer is to check out Dave Ramsey's website and his book "Financial Peace". He has helped a lot of people in your situation to finally get out of debt and find some peace of mind about their finances. He also has a wonderful radio program that airs in many cities and takes in callers. Best of luck to you! You can get through this!

    Bookmark   December 30, 2005 at 2:43PM
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You don't have to pay all your credit cars in bankruptcy if you meet the requiremets for section 7 and under section 13 you end up paying a portion of them. 15k could be a lot or a little depending on your income and other expenses. Also, you can file before counseling, but it must be completed before its finalized. I think 15k is manageable but without knowing other info its hard to say for sure.

    Bookmark   January 4, 2006 at 12:26AM
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Keck, you wrote:

Also, you can file before counseling, but it must be completed before its finalized.

Can you provide a cite for this? From everything I've read, you *do* have to complete the counseling before filing.

    Bookmark   January 4, 2006 at 6:25AM
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My mistake it must be completed within 180 days before filing...but can be over the phone or internet. I was thinking of the education requirement for chpt 13.

Here is a link that might be useful: Info

    Bookmark   January 5, 2006 at 11:36PM
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NO you will not lose your house. The lien can be recorded against your property but that lean is separate and does not include monthly payments. What it does do is when you go to sell you will pay.

First to get proceds is the 1st mortgage followed by the 2nd, 3rd and so on. Then mechanical liens, judgements, and I beleive lastly other liens. Then you would split the remainder with your partner. Good luck!

    Bookmark   February 9, 2006 at 11:25AM
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Definitely contact a credit counselor. They can negotiate payments and interest rates with the companies. Then the credit card companies will quit contacting you.

My STBXH spent 9 months convincing me to file BR on $35K worth of credit cards. So we did, just before law changed. Killed me to do it, but no other way.

Caught him cheating 1 mo later - after he ruined my credit - spent all MY $$$ ( I was the breadwinner, 65%+ of household income). I am back in the same shape financially now that WE were in before the BR. Plus, no credit. BR has still not been discharged b/c mortgage company has not submitted reaffirmation paperwork (MY house, not his) - which is also holding up my divorce (as well as fact that STBH wants to held harmless from all marital debt, that he helped run up, etc.)

Just a piece of advice -never mix $$$$ in a relationship. I am cynical and bitter, but i am living proof!

Good luck - don't let your partner make your finances any worse.

    Bookmark   February 19, 2006 at 11:37AM
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Wouldn't you just like to make an arrangment with some local farmer to bury that s.o.b in a manure pile?

Not entirely - just up to his chin.

Leave his head sticking out.

ole joyful

    Bookmark   February 20, 2006 at 4:47PM
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Definitely see a credit counsellor, but first check with your local consumer protection agency (here it's through the Attorney Generals Office) to make sure they're legit. Nothing could be worse than signing up with a shady credit counsellor and finding yourself worse off than before.

Don't fall for payday loans or other quick-relief schemes. And tell your friend you're handling it.

My in-laws listened to a 'friend' and filed bankruptcy even though their credit was sterling. The only deal was that they couldn't make their car payment and credit card payments and still have enough to get by every month comfortably. Meaning there was no cushion. They didn't even have their cards charged up to the max, and were not behind on payments, EVER. Their total debt less than $10,000...most of that being the car loan.

Some shyster got them to file bankruptcy using scare tactics and the same baloney logic you seem to be getting from your friend.

Later, after it was discharged, they financed another car, but because of the bankruptcy they had a very high interest rate. Then those payments got too high for their comfort, so they traded in that car and got the balance added to the new loan (negative equity) so now they drive a car worth no more than $3000 that they owe $17,000 on and their payments were lowered only $20/mo, but spread out for 7 years. All because some one told them to file bankruptcy.

How far out on your car loan are you? Can you sell it and get out from under it with any equity? Any way to unload the other party? Or at least make them start contributing?

Best of luck, I feel for you!

    Bookmark   February 22, 2006 at 3:23PM
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Hi all,

Just an update. I wound up working with the credit card companies and we came to an agreement. So as to not make my credit worse, they lowered my rate to 6% (from 29.9%!!!) They are waiving the late charges and overlimit fee (which occoured because the late charge kept piling up causing it to overlimit). I have a fixed payment that was based on my financial situation. But I foresee my financial situation getting better (car paid off, increase in salary) so I will be able to pay MUCH more than the proposed payment.

This is an incredible load of of my mind. I did not want to avoid these bills. I did not want to "pay off part of them" with bankruptcy. They are MY bills. I signed a contract under their terms and their good faith. Well due to unfortunate circumstances I broke that contract. Even though some of it was not my fault...regardless, it's a debt that I incurred and I feel strongly about paying my debt.

As for the thorn in my side...he did wind up finding a job making good money. Bottm line is that he is irresposible and horrible with money.

Like rosey, I am a woman scorned and my faith and trust has been ruined. I too am bitter, but I learned my lesson.

I will never legally marry. And if I can help it I want my finances far removed from the person I'm with. Trust no one!!

    Bookmark   February 24, 2006 at 11:21AM
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(Not even us)?

o j

    Bookmark   February 24, 2006 at 3:35PM
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Well....I guess there is an exception to every rule!

    Bookmark   February 24, 2006 at 4:43PM
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The problem isn't the friend, it's your partner. He had a car repossessed, has done nothing to rectify it.

I didn't read anything about team work, the two of you working on this together.

Probably it's easier to vent on the friend than to look at the real problem: the partner.

    Bookmark   February 25, 2006 at 12:02PM
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You are me a few years ago. Try one of the free Consumer Credit Counseling Agencies. They will negotiate lower interest and payments with your credit cards and give you a monthly payment that you can live with. However, they do take your credit cards away, so make sure that you get a payment that will leave you plenty of money for groceries, gas, and utilities. Do not file bankruptcy!! Any friend who tells you that is no friend. You CAN do this! And get rid of you credit cards - they are not worth the hassel.

    Bookmark   April 14, 2006 at 4:19PM
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