Bankruptcy or credit counseling?

[ICan'tWait]

My MIL just informed me that she stopped paying her bills because she is going to file bankruptcy. She was informed by someone that she would not lose her house if she filed bankruptcy. Her home is currently reverse mortgaged. I told her she should not have just stopped paying her bills and I found it hard to believe they would let her keep her house if she filed bankruptcy and that she should have at least tried credit counseling. I thought there were some legit credit counseling companies out there. My SIL and her family live with my MIL and I know that has been a financial burden but MIL is legally blind and relies on help from SIL.

Anyway, what should I advise her to do or help her with? Could credit counseling help? Too late for that? So many people on these boards give good advice, any input would be appreciated.

 

[tnd]

She needs to speak to a bankruptcy lawyer. There are some cases where you can keep your home, subject to repaying the mortgage of course, but I have no idea how that would work with a reverse mortgage.

 

[Inigo]

She needs to go see a few bankruptcy attorneys to discuss her options. Most BK attorneys will give a free initial consult.

They have changed the BK laws, and she will definitely need an attorney to file to make sure everything is done correctly.

One of the new requirements is that the person has to complete a credit counseling program, and provide proof to the Court.

How long ago did she get the reverse mortgage? What happened to the money from the reverse mortgage?

What are her expenses? What is her income? How much does SIL and her family contribute to the household? What is your SIL's family's income?

 

[Disney1976]

I just want to echo what others have said. She should speak to a BK lawyer familiar not only with the bankruptcy code, but the laws of her state as well (In Florida, for instance, it's very difficult to take a person's homestead -regardless of bankruptcy, a judgment against the person, etc).

If she doesn't know any BK lawyers, she can contact her state's bar association who can generally provide referrals.

 

[KKB]

I know "Consumer Credit Counseling" is a legit one; be careful, there are bad ones out there.

They will let you know if they can help you. If they recommend bankruptcy (which they will only if they HAVE to), head straight to an attorney.

Typically homes are NOT taken in bankruptcy, IF you can continue the payments.

Good luck.

 

[ICan'tWait]

She spoke to two bankruptcy lawyers. One told her to just stop paying her bills...... So she did. That just doesn't sound right. I told her if she goes back in to see anyone that she needs to bring someone with her. My SIL drove her but didn't go in with her. SIL rarely contributes anything to household bills (SIL is always in a state of financial crisis - which MIL has obviously helped too much with).

The reverse mortgage money is gone. She used it to pay off two loans she took on the house (which was paid off 10 years ago ).

 

[KKB]

Your bills must be past due before you can declare bankruptcy. Also, she needs to pay NO ONE (except the mortgage, and possibly car loans) more than $500 for awhile prior the declaring...they will ask those creditors or people to return the money!

 

[Inigo]

Your bills must be past due before you can declare bankruptcy.

Not according to my friend who is a BK attorney.

 

[ahankins4]

She should listen to Dave Ramsey, or you could email him through his website which is his name.com.
He has been there, and has great advise for people in a bad financial situation. He is definitely worth looking into. He also has a lot of information on his website about filing bankruptcy, and why you should not do it, if it can be helped.
I hope this helps!!

 

[KKB]

Not according to my friend who is a BK attorney.

My information is from 6 years ago.

I do know the laws have had some changes since then...not sure of the specifics.

 

[GenieCat]

The legitimate credit counseling services that do not charge a fee are found through your local United Way.

http://www.liveunited.org/

Run as fast as possible from any credit counseling agency that wants to charge for their services. They are usually owned by the credit card companies, and will only get their victims further into debt. I'm not sure why these types of unethical companies are allowed to conduct business.

 

[runswithscissors]

My information is from 6 years ago.

I do know the laws have had some changes since then...not sure of the specifics.

The laws have changed dramatically and it is best for your MIL to speak to a reputable bankruptcy attorney. FIL is a Federal Bankruptcy Judge and the stories we've heard regarding bad advice from "bankruptcy attorneys" are horrendous.

 

[ILuvCrush]

Good Luck

 

[Fritochips4u]

Your bills must be past due before you can declare bankruptcy. Also, she needs to pay NO ONE (except the mortgage, and possibly car loans) more than $500 for awhile prior the declaring...they will ask those creditors or people to return the money!

Not according to my friend who is a BK attorney.

The laws have changed dramatically and it is best for your MIL to speak to a reputable bankruptcy attorney. FIL is a Federal Bankruptcy Judge and the stories we've heard regarding bad advice from "bankruptcy attorneys" are horrendous.

You do NOT have to be behind at all to file bankruptcy. In fact, it is easier to "re-bound", credit-wise, if you AREN'T behind.

If you are current with your mortgage, you are allowed to keep the house.

As for the bankruptcy attorney telling her to stop paying her bills, yes, they probably said that. Why should she continue to pay her bills when she's going to file BK?

Also, credit counseling ruins your credit JUST AS MUCH AS BANKRUPTCY DOES. Why wouldn't you file and get rid of the debt?

Good luck to her!

 

[ExPirateShopGirl]

My information is from 6 years ago.

I do know the laws have had some changes since then...not sure of the specifics.

The federal Bankrupcty code was overhauled in 2005.

 

[ExPirateShopGirl]

You are not allow to keep the house if the equity in your home will pay your debt after the $75K personal exemption is applied.

PLEASE talk to a reputable attorney who specializes in bankruptcies.

You do NOT have to be behind at all to file bankruptcy. In fact, it is easier to "re-bound", credit-wise, if you AREN'T behind.

If you are current with your mortgage, you are allowed to keep the house.

As for the bankruptcy attorney telling her to stop paying her bills, yes, they probably said that. Why should she continue to pay her bills when she's going to file BK?

Also, credit counseling ruins your credit JUST AS MUCH AS BANKRUPTCY DOES. Why wouldn't you file and get rid of the debt?

Good luck to her!

 

[Inigo]

You are not allow to keep the house if the equity in your home will pay your debt after the $75K personal exemption is applied.

PLEASE talk to a reputable attorney who specializes in bankruptcies.

The $75K exemption may be the case in YOUR state, but not for the OP's state. Every state has it's own set of exemptions, even though bankruptcy is filed in the federal courts. Some states allow a lot of exemptions, and other states have meager exemptions.

Go see several reputable attorneys (who specialize in BK) to see what your options are. They should offer a free consultation, and you can talk to several to find one that you feel comfortable with and who can answer your questions.

 

[Jaklackus]

You do NOT have to be behind at all to file bankruptcy. In fact, it is easier to "re-bound", credit-wise, if you AREN'T behind.

If you are current with your mortgage, you are allowed to keep the house.

As for the bankruptcy attorney telling her to stop paying her bills, yes, they probably said that. Why should she continue to pay her bills when she's going to file BK?

Also, credit counseling ruins your credit JUST AS MUCH AS BANKRUPTCY DOES. Why wouldn't you file and get rid of the debt?

Good luck to her!

Even with the changes in bankruptcy law a lot of this still holds true...in fact the new laws require a call to a credit counselor as part of the process. The reverse mortgage is probably going to muck things up a bit though..I would strongly recommend finding an experienced bankruptcy attorney.....also the other income in the house might factor in. There are state specific guidelines too..she needs to find a lawyer familiar with her area and the trustees in her area.

creditboards.com has a bankruptcy forum with a very helpful and non judgmental group of people happy to help you through the bankruptcy and rebuilding credit afterwards....when you have to give up vacations and eating out to pay Mastercard it's time to buckle down......when you go without food in the pantry, clothing, heat and medicine to pay Mastercard....it's time to stop paying Mastercard.

 

[ExPirateShopGirl]

Bk code is fairly detailed. If there's money in that house beyond *** and ANY exemption, a debtor's creditors are entitled to it should they file claims.

Bottom line is do NOT rely on internet chaboards but, rather, an experienced bk attorney, as mentioned throughout the thread.

The $75K exemption may be the case in YOUR state, but not for the OP's state. Every state has it's own set of exemptions, even though bankruptcy is filed in the federal courts. Some states allow a lot of exemptions, and other states have meager exemptions.

Go see several reputable attorneys (who specialize in BK) to see what your options are. They should offer a free consultation, and you can talk to several to find one that you feel comfortable with and who can answer your questions.

 

[Fritochips4u]

Even with the changes in bankruptcy law a lot of this still holds true...in fact the new laws require a call to a credit counselor as part of the process. The reverse mortgage is probably going to muck things up a bit though..I would strongly recommend finding an experienced bankruptcy attorney.....also the other income in the house might factor in. There are state specific guidelines too..she needs to find a lawyer familiar with her area and the trustees in her area.

creditboards.com has a bankruptcy forum with a very helpful and non judgmental group of people happy to help you through the bankruptcy and rebuilding credit afterwards....when you have to give up vacations and eating out to pay Mastercard it's time to buckle down......when you go without food in the pantry, clothing, heat and medicine to pay Mastercard....it's time to stop paying Mastercard.

You don't have to call a credit counselor....you need to have 2 "educational courses", which can be done over the phone. It's not a law to speak with a credit counseling agency.