Let's talk bankruptcy

[RhyssaFireheart]

So bankruptcy update (since I mentioned we were thinking about it in a thread somewhere around here) - we had a consult with a lawyer on Wednesday morning and it went about how I'd expect.  My salary is on the high side for us to immediately qualify for chapter 7 but he thinks we may still qualify due to the amount of debt we have.  Otherwise it's chapter 13.  The husband's car might be a problem because it's a Toyota Highlander and despite being a 7 year old car, they hold their value.  Plus we are almost done paying it off which makes it an asset that the trustee could decide we need to sell.  And that would be BS because then we'd have to go into payments again to get him a replacement because we need two cars.  It's a really stupid thing, IMO.
 
The thing that makes my gut churn though is that the lawyer said we list all our debt, including both the first and second mortgages, but that we do not reaffirm either of those debts.  I repeat - we do not reaffirm those secured debts and allow them to be wiped away.  Then he says to just keep paying on the mortgage though, and pay it off as normal.  Which is very, very    to me.  Who holds the note then?  Whose names are on the title?  If the debt is cleared, what's to prevent our lender from not taking our payments and then eventually foreclosing on us?  It's just all sorts of crazy talk to me.  The rest of it... yeah, we ran up a lot of CC debt over almost 25 years together, but I'm not going to particularly weep about getting all the unsecured debt wiped away.  Not to mention we are half-way through a 30 year mortgage and only have 8 more years left on the second mortgage, so no way do I want to screw either of those up.  It's freaking bad enough that I have to go this route in the first place.
 
And if we do what the lawyer says and don't reaffirm the mortgages but continue to pay them... it does nothing to reestablish our credit.  And paying off secured debts, like say a mortgage, is one of the quickest ways to reestablish credit.  The sucky thing is that after we file, even if we did reaffirm a few of the CC debts (like ones just in my name), the companies will probably close the cards anyway.  Seems weird to think about not having any CCs at all.  Like, I use my Lane Bryant card regularly because it's where I shop for clothes.  Ugh.
 
Anyways, we haven't decided what to do yet but I can't see a way out of the hole we're in now.  The husband has someone else he knows who is a BK lawyer and he's going to try to get an appointment with that guy for a second opinion basically. 

[Paelos]

You're unfortunately getting into legal advice issues, so no professional here can really advise you without violating our licenses. What people can tell you is their experiences if any. Actually Bob is probably the best guy for this job.

[HaemishM]

All I can say is get used to not having a credit card. They are goddamn traps and the fact that you feel like you need one is proof that the trap has worked.

You don't need one. My credit is super shitty partly because of bad credit card debt from cards I didn't need. I haven't had a credit card in at least 6 years (maybe longer - it's been long enough I don't remember when I had it or what the last one was) and the only time I've missed it is when I needed money I didn't have and wouldn't be able to get. Otherwise, it's just a way for some banker shitheel to make interest off of your inability to wait/save up for something you may or may not need. A debit card from your checking account will pretty much do all the things you need a credit card for these days (including renting cars at certain rental places and holding hotel rooms) and you won't be buying things with money you don't have that you'll have to pay interest on.

In short, FUCK CREDIT CARDS.

[RhyssaFireheart]

All I can say is get used to not having a credit card. They are goddamn traps and the fact that you feel like you need one is proof that the trap has worked.

You don't need one. My credit is super shitty partly because of bad credit card debt from cards I didn't need. I haven't had a credit card in at least 6 years (maybe longer - it's been long enough I don't remember when I had it or what the last one was) and the only time I've missed it is when I needed money I didn't have and wouldn't be able to get. Otherwise, it's just a way for some banker shitheel to make interest off of your inability to wait/save up for something you may or may not need. A debit card from your checking account will pretty much do all the things you need a credit card for these days (including renting cars at certain rental places and holding hotel rooms) and you won't be buying things with money you don't have that you'll have to pay interest on.

In short, FUCK CREDIT CARDS.

Oh, this I totally agree with.  It's crazy how dependent we've been with our CCs without even realizing it at a conscious level.  The debit card should be fine for everything we need going forward.  It really is far too easy to just use a CC for incidentals like picking up breakfast or a new shiny... definitely a trap.

You're unfortunately getting into legal advice issues, so no professional here can really advise you without violating our licenses. What people can tell you is their experiences if any. Actually Bob is probably the best guy for this job.

Wasn't necessarily looking for legal advice.  More wanted some.. validation.. that my reaction to the whole mortgage thing wasn't me just being silly.  I really can't understand why anyone would consider no reaffirming the debt for the largest asset they probably own and plan to continue living it, as long as they can afford it and aren't upside down on the value, that is.

[01101010]

All I can say is get used to not having a credit card. They are goddamn traps and the fact that you feel like you need one is proof that the trap has worked.

You don't need one. My credit is super shitty partly because of bad credit card debt from cards I didn't need. I haven't had a credit card in at least 6 years (maybe longer - it's been long enough I don't remember when I had it or what the last one was) and the only time I've missed it is when I needed money I didn't have and wouldn't be able to get. Otherwise, it's just a way for some banker shitheel to make interest off of your inability to wait/save up for something you may or may not need. A debit card from your checking account will pretty much do all the things you need a credit card for these days (including renting cars at certain rental places and holding hotel rooms) and you won't be buying things with money you don't have that you'll have to pay interest on.

In short, FUCK CREDIT CARDS.

Amen. I been in and out of the lion's cage since college and finally consolidated all my cc debt about 5 years ago and paid them all off 2 years ago. I opened a CC card for emergencies and the occasional online purchase - but always am conscious about the balance and even had my bank set the limit low enough to be sure not to abuse it. It is also helping to build my horrid credit score because you really can't do a whole lot in this society without some form of credit. I forced myself to use my debit card and be extremely vigilant about my account balances. Took 20 years, but it is finally on the level.

[Abagadro]

If legal advice doesn't sit well my general advice is to seek another opinion from a different lawyer. If they match up it is a good bet they are right in just a counterintuitive way.

[MahrinSkel]

Yeah, I'm not a lawyer and although I like to offer commentary on legal issues in the press or hypotheticals, I also consider myself competent to comment on medical stuff.  Doesn't mean that I would grab a scalpel and start cutting. You're in an actual legal proceeding, and if you are doubting your lawyer then you need the opinion of another lawyer with applicable expertise.

Or just ask your lawyer to explain why he's giving advice that seems counter-intuitive. What's the specific provision of bankruptcy law that makes him say that you should continue paying on the mortgage? I'd guess it's because real estate, especially when you live in it, is handled differently than other debt (it often is), but he's the person you're entrusting to get you through the process. You need to have confidence in him, and if he can't explain to you why things need to be done a certain way then maybe you need a different lawyer. This is going to be a hard process, he's going to have to do things you don't understand, but if you're not confident in him it's going to make it even harder. Yeah, the explanation is going to cost you the hourly rate, but without the confidence it's going to be even more upsetting and confusing.

I may not grab a scalpel and start cutting on myself, but before I let my doctor do it I make sure I understand why he thinks it needs to be done. You have to defer to your experts, but that doesn't mean you have to have blind faith. If you're confused, you may do something stupid later.

--Dave

[Samwise]

I may not grab a scalpel and start cutting on myself, but before I let my doctor do it I make sure I understand why he thinks it needs to be done. You have to defer to your experts, but that doesn't mean you have to have blind faith. If you're confused, you may do something stupid later.

Most of the headaches I've had regarding my house (from financial to legal to construction adventures) resulted from me figuring it was easier to just trust the expert at hand than to get a second opinion or argue when something wasn't sitting well.

[Hawkbit]

A debit card from your checking account will pretty much do all the things you need a credit card for these days (including renting cars at certain rental places and holding hotel rooms) and you won't be buying things with money you don't have that you'll have to pay interest on.

Derail here, but:

This is okay IF you debit card has fraud prevention on it.  If not, kill your debit card.

About three years ago on Christmas morning, we were hacked on our debit card to the tune of four transactions totaling ~$3600.  Luckily the idiots triggered them from overseas and all four transactions were within a few minutes, so we got a phone call from the bank within minutes of it happening.  The first (and smallest) transaction took weeks to get back; the second three we got back immediately.  The fraud investigator told us it's 50/50 whether people in these situations actually get their money back or not.  Because the money from the first transaction was gone, the bank absorbed the loss.

[Teleku]

Yeah, I like Debit cards, but I try to avoid using them now while abroad for the same reason.  I had my credit card stolen (well, my entire wallet) 2nd week in Poland while out at a bar.  Several thousand dollars were wracked up on it by the time I realized it had happened.  It set off triggers with the CC company, and after talking with them, they canceled every single charge for the night (including legit ones, hah).  That would not have happened at all if it had been my debit card (which thankfully wasn't in my wallet that night), from everything I've read.  They've already removed the money from your bank account, so its a lot harder to get it back.

I avoided credit cards so long because I was afraid of debt (because of how I watched it destroy my family).  Only got my first one at age 26 at the urging of family who said I needed to start some sort of credit history (made it my entire life, even through college, without taking any debt at that point).  But they are very useful if you effectively treat them like Debit Cards.  I mean, the first two years I had one, I basically opened up my phone and paid off the charge online after every single time I used the card.  I'm better now, and just make sure to pay it off the entire thing every month.

You gain a credit score, have much better fraud protection, and get extra money in the form of rewards from using the card.  It's really the best thing to use if you have any measure of self control.

/tangent

[shiznitz]

Wasn't necessarily looking for legal advice.  More wanted some.. validation.. that my reaction to the whole mortgage thing wasn't me just being silly.  I really can't understand why anyone would consider no reaffirming the debt for the largest asset they probably own and plan to continue living it, as long as they can afford it and aren't upside down on the value, that is.

Don't trash your common sense and gut instincts just because someone sounds like an expert. I second having another lawyer take a whack at it.  There are good and bad lawyers, just like there are good and bad doctors.

[IainC]

I don't know what the consumer protections are like in the US but when my ex-wife's Irish debit card was skimmed and her account emptied via an Italian ATM, we got all the money back as the bank could see that the transactions were clearly fraudulent. The bank arranged a free overdraft to the value of the money that was stolen as an interim measure, then once they'd recovered the money from the Italian bank, they paid it back to her in full. Other than a certain amount of inconvenience while waiting for new cards to be issued and a couple of meetings at the local branch the net cost to us was zero.

[schild]

Just hopping in to say - credit cards aren't evil, people are just stupid about managing money. I went into pretty heavy debt in college because I was young and stupid, but the net result of digging out of it is that my credit score is out of control, between my (grand total of 2) credit cards if something terrible happened, I could put a downpayment on a $400,000 house or buy a /nice/ car, and my interest rates are incredibly low (for credit cards).

Credit card management is a very loose part time hobby in that it's probably worth taking a bit of your time to learn how to juggle potential and worthwhile debt to make them work, because eventually they're nothing but a net positive and you don't have to pay attention to them. One of mine carries absolutely zero balance 100% of the time (purely for emergencies) but has an APR of only 9.90% and cap of something like $33k.

If you travel, EVER, a credit card is absolutely a must have.

tl;dr: Fuckups with credit cards aren't a side effect of credit cards being evil, they're a side effect of terrible money management which is something some people learn really early and other people learn really late.

[RhyssaFireheart]

Well, to be fair this is debt that we've built up over 25 years, dating back to when credit cards companies were throwing cards at college students like they were candy.  And perhaps my husband had done it, but I'd never seen our entire debt history laid out on paper before like he did recently.  It is hard to get a feel for exactly how many credit cards you have when over half of them are closed and you're just paying on them.  I think I'm still in a bit of shock finding that bit of info out.  And it's not any sort of hidden debt I didn't know about.  I just never added up how many different cards we had.

[Trippy]

Services like Mint that can aggregate multiple financial services in one place are very handy in this regard.
 

[HaemishM]

tl;dr: Fuckups with credit cards aren't a side effect of credit cards being evil, they're a side effect of terrible money management which is something some people learn really early and other people learn really late.

Or to put it another way, credit cards are marketed and sold to fuckups who have terrible money management skills. Those fuckups are the real gravy customers for credit card companies because of all the fees and interest they can make off of them.

[schild]

tl;dr: Fuckups with credit cards aren't a side effect of credit cards being evil, they're a side effect of terrible money management which is something some people learn really early and other people learn really late.

Or to put it another way, credit cards are marketed and sold to fuckups who have terrible money management skills. Those fuckups are the real gravy customers for credit card companies because of all the fees and interest they can make off of them.

Rubes are required for capitalism to function. In summation: Don't be that guy and don't try to nanny that guy.

[Torinak]

I don't know what the consumer protections are like in the US but when my ex-wife's Irish debit card was skimmed and her account emptied via an Italian ATM, we got all the money back as the bank could see that the transactions were clearly fraudulent. The bank arranged a free overdraft to the value of the money that was stolen as an interim measure, then once they'd recovered the money from the Italian bank, they paid it back to her in full. Other than a certain amount of inconvenience while waiting for new cards to be issued and a couple of meetings at the local branch the net cost to us was zero.

For debit cards, there are generally few to no consumer protections in the US. Why? Because fraud impacts the consumer, not the bank.

If you're really lucky, fraudulent debits might eventually get reversed. Maybe. And in the meantime, you're out the money, and can easily rack up overdraft charges.

(edit to add:)

And that whole chip-and-pin stuff? That's an effort by the banks to move the expense of fraud onto the consumer, not the bank--they claim that because they're "so secure" if there's fraud the consumer was obviously in on it and therefore you're up the creek. This despite multiple critical vulnerabilities existing in the chip-and-pin system. So, soon enough consumers in Europe will enjoy all of the great consumer protections that exist in the US! Go capitalism!

[Chimpy]

Actually, that is not correct. Chip and pin/signature is not to put the cost of covering fraud on the consumer, it is to put it on the merchant. Consumers will still be protected from credit card fraud in the same way, it is just that if the merchant doesn't use the chip+sig/pin after Oct 15, 2015 they will be liable for covering the fraud by refunding the consumer.

With the current system, the cost of fraud is shouldered by the card issuing banks. Merchants get paid for the charges and consumers get the charges waived in cases of fraud. Thus why the merchant fees are "so high" (as you hear a lot of people who don't want to accept credit cards or require minimum purchases say), that merchant fee is where the credit card processors get the money to cover the fraudulent payments.

[MahrinSkel]

Actually, that fee is where the card brand owners get the money they kick back to the issuing party for using their logo/clearinghouse rather than another one. Why do you think everyone and their brother wants you to get their branded Visa/Mastercard, that can be used anywhere (not just with them)? Because they'll make money on every purchase you make. Shell, Home Depot, Best Buy, it's an even better deal for them than gift cards. Where do you think the money for those "reward points" comes from? ApplePay is an effort to get enough traction to get a cut of that action while providing their own competing security standard.

Who gets to hold the bag for fraudulent charges depends on the matrix of parties that were involved (the merchant, their processing agency, the credit clearinghouse, the issuing bank, the issuing party) and the details of how the fraud was performed. The chip is an attempt to make it a little less trivial to create a fake card that will work at POS (you can buy everything you need to create nearly flawless fake credit cards on Amazon for a few grand). If they can't settle the finger of blame between them, it will bounce back on you.

Makes a difference if a PIN is involved, as well. It used to be that any PIN/ATM transaction was automatically the responsibility of the account holder, that is slowly changing (mostly in response to legislation and the threat of more). Logical next step is biometrics, but that gets really expensive for all of the POS installations, nobody is seriously planning it as far as I know.

--Dave

[CmdrSlack]

Rhyssa, this is part of my practice area. If you are still in Illinois, then you should PM me.

[Tannhauser]

Rhyssa,  I am not an expert at all but if I were you I'd make the lawyer explain the situation to me over and over until I understand the terms of the deal. Sounds to me like he doesn't want you to reaffirm the debt.  Reaffirming means after Chapter 7 you are still on the hook for those debts.  Maybe reaffirm the Highlander since it's paid for and it's collateral?

Your case is interesting and I hope it all works out for you!  Let us know.

Oh and yes, fuck credit cards.  I fell into the college credit card trap and it took me years to escape.  Haven't had a CC in almost twenty years now; I have an amazing credit union and a debit card of the gods.  It did get hacked three years ago and they took my entire paycheck (but didn't touch savings).  My CU reimbursed me the full amount and beefed up their security.

Fuck banks, fuck credit cards. 

[RhyssaFireheart]

Rhyssa, this is part of my practice area. If you are still in Illinois, then you should PM me.

Hey, Slack.  I wasn't sure if you were still here in Illinois or not and what your area of expertise was.  I'll give you a PM then.

The interesting thing is that the husband was on the website of the other BK lawyer that he knows and was reading linked research articles and in those, the lawyer says to reaffirm any mortgage debt.  Which makes sense to me, but IANAL.  That's why I'm PMing Slack. 

[Baldrake]

You're unfortunately getting into legal advice issues, so no professional here can really advise you without violating our licenses.

You know, I would truly love it if I could pull this out when people ask me for computer-related advice. "So sorry, I'd love to help you with why your mouse isn't working on your Windows XP box, but can't advise you without violating my license."

(Rhyssa, sorry you guys are going through this. Must be intensely stressful.)

[angry.bob]

If legal advice doesn't sit well my general advice is to seek another opinion from a different lawyer. If they match up it is a good bet they are right in just a counterintuitive way.

Yeah, pretty much what I was going to say just with less profanity. Even if the advice you had gotten was just what you're looking for I'd still see a second and possibly a third lawyer. Here in Ohio Bankruptcy attorneys will usually do a free one hour consultation with you and see what's up. If you've already gotten all your info together it's not any harder to get more opinions and the lawyers can tell what's what a lot faster. The more professional eyes you have looking at a problem, the more more thorough the solution that you have available to you. Plus, I've been to a few highly recommended lawyers who told me a lot of bullshit because they didn't want to any sort of extra work above all the info you hand to them.

Some of what you mentioned sounded a little odd to me though, especially about the mortgage. That alone would make it worth seeing a second or third guy. One of my wife's co-workers got boned really bad with a mortgage on a house they were trying to sell because one of those "highly recommended" lawyers didn't handle it right.

As far as credit cards, don't worry about it. Your mailbox will be PACKED with pre-approved credit card applications in a week or two after discharge.

Also, banks can take their time giving your money back after fraud. A guy I worked with at Roadway had his account cleaned out by some landscaper he hired. The landscaper took my coworker's routing and account numbers and had them printed on checks that his name and address on them. It took him almost a year to get all his money back, basically the bank gave it to him when they got it back.

[angry.bob]

Rhyssa, this is part of my practice area. If you are still in Illinois, then you should PM me.

Hey, Slack.  I wasn't sure if you were still here in Illinois or not and what your area of expertise was.  I'll give you a PM then.

The interesting thing is that the husband was on the website of the other BK lawyer that he knows and was reading linked research articles and in those, the lawyer says to reaffirm any mortgage debt.  Which makes sense to me, but IANAL.  That's why I'm PMing Slack. 

Oh, this was farther down the thread.

Anyway, for what it's worth I'm sorry that you're going through this since it's probably causing you guys a ton of stress. The silver lining I can point towards is that even if you have to go the Chapter 13 route things will be sooooooooooo much better afterwards.

Good Luck.

[Sophismata]

Credit cards are fantastic and a must for travel. I would be very wary of using a debit card in many countries without some solid assurances from the providing bank. It's not just about purchase convenience, though - there are many ancillary benefits to using a real credit card designed to make them more appealing.

The only proviso is – pay the card off. If you do, it will be cheaper than using a debit card due to the reward kickbacks.

[Maven]

I used to hate having a credit card until my Accounting Principles course explained Accounts Payable liability accounts. Now I have a new respect for them. It really does take discipline to use "right" and not end up thinking the card is a key to long term loans.

Those credit protections are nice. That advice is sound: use a card for points or what have you, pay off each month, respect your cash flows, protect your liquid assets.

[Cyrrex]

Those are all fine, solid points.  Only why do you think such benefits exist?  Because most people are letting the credit take advantage of them, not the other way around. 

[Paelos]

Credit cards are a fantastic way to buy 30 day float for essentially nothing. It's also a good way to bail yourself out of an emergency that you can catch up on within the quarter while paying a couple hundred bucks for the time.

Other than that, it's crippling. If can't catch up in 60 days, credit card debt will bury you.

[Maven]

I did not get the education until this year at 33 with 4 credit cards owned in my lifetime. Wise financial management was not taught in my household. The extent of my father's Information was a simplistic "Put it all in a IRA." He knew fuck all about anything else and never bothered to communicate the Why's -- the Why is so critical.

Instead, I had magical thinking at 18 and racked up considerable debt to get the things I wanted.

[Malakili]

Yeah, that's rough.  I'm lucky I grew up with good money sense in the household.  My parents simply didn't spend money they didn't have.  The credit card was a thing for convenience and (eventually) online shopping, but was really just another route to paying for things normally.

If my parents couldn't have paid for it by check, they didn't pay for it by credit card.  That's how I think about it.  If I couldn't pay this off the moment I'm using the card, I just consider it to be something I can't afford.  Well it's slightly more complicated than that because I like to keep a decent savings too, so things I "could" pay off are still things I can't really afford assuming I want to keep a cushion in savings in case things go wrong somewhere.

[Lantyssa]

That's exactly how I was raised to use a credit card.  And I ended up being better at it than my parents.

[jgsugden]

It kills me that there is no 'life skills' class in high school that teaches people how to use credit cards, how to manage a bank account, how to do the basics of raising a kid, how to pay bills, how to manage passwords, etc... It is ridiculous that kids learn more about how people lived in the Civil War than they do about how people live today. 

[01101010]

It kills me that there is no 'life skills' class in high school that teaches people how to use credit cards, how to manage a bank account, how to do the basics of raising a kid, how to pay bills, how to manage passwords, etc... It is ridiculous that kids learn more about how people lived in the Civil War than they do about how people live today. 

'Murica! Hoorah! Land of opportunity. Blaze your own trail! Use those history lessons to learn what not to do and how you are way better off today than back then.

I agree with you, but it has no standards by which to test basic knowledge. I mean how do you test whether or not you learned how to raise a child?