There are two types of bankruptcy – one where you have to pay creditors for five years before you are free, and the other where your assets are liquidated but you can stop payments immediately. I opted for the latter, but it’s not available if you make too much money (where too much = more than the average person in your area). Fortunately I live in a fairly wealthy suburb of Atlanta, but still I just barely managed to squeak under the line. Bear in mind that I’m an IT pro so I can demand more than McDonald’s wages, but I work for a contracting company (contract work pays less than working directly for an employer) who cut our pay by 10% at the beginning of the year, takes excessive deductions from us (they dropped the 401k program on me without my knowledge or consent, and my health insurance costs more than twice what it would if I purchased it directly as an individual), and who gives us no paid holidays or sick days and won’t allow us to use vacation time to cover days missed due to illness or hospitalization. As it turns out, if my employer wasn’t so crappy and I didn’t spend so much time out sick, I would have been deemed too rich for full bankruptcy. This is a recurring theme in my life. Last year I was deemed too wealthy to get healthcare from the VA, and the first Bush administration decided I was too rich to attend college without putting myself in debt to the government for life (I was living off less than $12k/year at the time).
By liquidating my assets, that means using my stocks, bonds, 401k plan, and other properties I may own that are not essential. It does not include my house (which I don’t have), car, personal possessions or bank account. Of course, if I had those other things I would have already sold them to try to pay off the debts. I did already liquidate my 401k, which is the only way I could have afforded the attorney. If you wait until you run out of money before filing, it’s too late. Even if you don’t hire an attorney, there are still legal fees and the 2005 law requires you to pay a credit counseling service for debt education and evaluation (two separate things, each with a fee). Also, they seriously frown on you using credit while in the process of filing, so paying for those things with your Visa is out.
My next step is to fill out even more paperwork, submit more stuff to my lawyer, and do the first part of the credit application. After that we get a court date, do the official court thing, and then wait six months for the final judgment to go through. During this wait period (I think this is also due to the 2005 law) my creditors can continue to report my accounts as delinquent, add interest and penalties, and further wreck my credit. However, the medical community already pre-wrecked my credit, so that’s a wash. The hospitals will have to stop sending me old bills or creating new bills for old procedures, but if they claim to have outsourced work to someone unknown to me (someone I therefore can’t contact them to tell them I’m filing), then they could still bill me. It sounds far-fetched, but it’s already happened to me once.
Further bulletins as events warrant.