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 Dear
Bankruptcy Adviser,
Help! I am in need of advice. My finances are
a total wreck. About seven months ago I became
totally disabled and no longer could work. I receive
disability checks now. I used all my savings just
to get by. In 2001, I filed Chapter 7 bankruptcy
and it was discharged in 2002. Currently, I have
credit cards and two car payments that I cannot
pay. I am about to lose one car to repossession.
Can I file Chapter 13 to try to salvage my situation?
I have tried to work out something with the car
lender but I cannot keep up with their demands.
-- Lee
 Dear
Lee,
As you may already know, due to a 2005
change in bankruptcy law, you cannot file
Chapter 7 bankruptcy until year 2009 at the earliest.
As well, if you default on your car loan, the
lender can repossess the vehicle. I'm sorry, but
it looks as though you are likely to lose both
cars. You are permitted to file a Chapter 13 bankruptcy,
but the problem is that you must be able to afford
a Chapter 13 reorganization plan payment. You
ought to speak with a bankruptcy attorney to see
whether you qualify for a car balance reduction.
This is a possibility when you file a bankruptcy,
but you must meet very specific and strict guidelines.
However, your other creditors are not a threat right now. They could sue you and obtain a judgment, but what could they take? By law, they can't garnish your disability check, and if there's nothing in your bank account, they can't levy it. In the world of bankruptcy attorneys, you might be what we call "judgment proof." Meaning, even if the creditor obtained a judgment against you, it would be almost impossible to enforce the judgment. As a result, your case will be a very low priority for the collection agency trying to take your money.
My suggestion is that you keep your checking account with a very low balance or empty it. Notice I did not say to close it. It might be useful to you down the road. In the meantime, I strongly suggest you live entirely on cash. This way, creditors will have no way to go after what little money you have.
A traditional method is to cash
your check and divide the cash into four envelopes,
one for each week of the month. Then, for day-to-day
expenses, only spend what's in the envelope. It's
hard, but your back is up against the wall, Lee.
To recover, you will need to make some hard choices.
One purchase I definitely recommend is a cheap phone call recorder. You need to record any phone call that comes in from a collector.
Each time a bill collector calls,
you must say the following: "Yes, my name
is Lee XXX. To let you know, I am recording our
phone conversation, do you consent?" If the
caller says "yes," then you are dealing
with the good collectors who are simply trying
to find out whether you can pay. Tell them your
situation in general terms and do not commit to
any money or payments until you have enough for
you and your life.
If the caller says, "No, I
do not consent," then you must say, "Then
I cannot continue our conversation; have a nice
day." Then hang up the phone. Do not let
them intimidate you. You have enough to deal with
regarding your health, so take a strong stand
when dealing with all collection calls.
The most important thing right now, Lee, is staying above water. You can't let this situation get any worse. Now is the time to call in your favors, ask family members for help and do whatever it takes. You need to reduce your expenses to the barest minimum in order to allow yourself the time to rebuild your financial position and, if at all possible, regain your health.
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