Q: I lost my job and I cannot pay my credit card bills or my car note right now. I am still current on my mortgage payment but I heard that I can file bankruptcy and keep my car and my house without having to pay for them. Is this true?
A: No. If you file Bankruptcy (either Chapter 13 or Chapter 7) you have to continue to pay for the things that you want to keep. For example, if you owe $12,000 on your car and you file Chapter 13 (where you make a monthly payment), you will have to pay at least $220.00 per month over a five year period of time to pay off the car. If you file Chapter 7 you will have to continue to make your regular monthly payment on the car in order to keep it. As far as your mortgage payment, you must continue to pay the regular mortgage payment every month when it comes due under either Chapter 7 or Chapter 13 in order to keep your house.
The best thing for you to do right now is to prioritize your expenses until you find a new job and can make all of your payments again. Make a list of your monthly expenses and put a number beside each item according to how important the item is to you. Food, shelter, healthcare, and clothing are probably the things that should have the highest priority. Transportation may be next. Therefore, put a #1 beside your grocery expense, put a #2 beside your mortgage payment, a #3 beside prescriptions and doctor co-payments, a #4 beside school and work clothes, and a #5 beside your car payment. Pay your expenses in order of priority until you get back on your feet.
The longer you have been in your home and the more equity you have built up in it, the more valuable an asset it is to you. Many people with financial problems don’t realize how important it is to protect and preserve their existing assets when they are having problems paying their bills on a monthly basis. Take it from me, making sure your home is adequately insured against losses such as fire should be a high priority. There may come a time when you have to make some really tough decisions and sacrifices. The sooner you seek advice from an attorney like me who counsels people about their financial options every day, the better off you will be. I always offer free consultations for people facing financial problems.