QUESTION: My wife and I are having problems with our finances. She is a nurse and brings home about $4,000 per month. While, I work in a real estate brokerage firm and brings home about $3,000. When the real estate business was booming, we were making a lot of money.
We even used to flip houses, at one point we own five houses. At that time, we were thinking about running a nursing home as a business. However, my wife was hesitant to leave her stable job. For the last couple of years, however, I was barely making money and all our savings were used up trying to save all of these houses. We hope to sell them for a profit or even just to short sale some of them. Eventually, we lost them one by one. Our home is our only property right now.
Our financial situation had put a great strain in our marriage that we are seriously considering divorce. I have moved out of our house so that our eight year old daughter will not see us fight. My wife and I had accumulated a lot of credit card debts. Aside from our mortgage debt, jointly we have about $40,000 debts in credit cards. She has $10,000 credit card debts in her name alone, while I have about $20,000 that is solely my debt. All in all our debt amounts to $70,000. Even just making the minimum payments on these cards, put a strain on our resources. Our savings had been used up and we have even borrowed from my wife’s 401K account. Some of these debts, are spent on flipping houses. My wife blames me for our financial mess.
A friend recommended that we file bankruptcy. My wife does not want to ruin her credit but frankly, since we have a lot of foreclosures, it is already ruined. I am ready to file bankruptcy but she is not. Can I file bankruptcy on my own. What about our joint debts? Now, I am renting an apartment and have to maintain a separate household on top of my support for my daughter. I want to continue supporting her, but I am barely making enough money for myself and all my debts. I have been behind on some of my bigger credit cards, and the credit card companies are calling me at work, in my personal cell phone and my wife’s house. She is very annoyed because they are threatening to sue her too. What do you recommend we do.
Answer: It seems that you and your wife have already made up your mind about divorce. You can file for an uncontested divorce or legal separation first. Then, you can personal bankruptcy under Chapter 7 because we can show that you are making less than the state family median income for California based on your income alone.
Please note that even if you are married, you can file for own personal bankruptcy. However, the bankruptcy court will look at your household income to determine the chapter you will fall under. You and your wife joint income, places you under Chapter 13. Under Chapter 13 (Wage Earner’s Reorganization), you need to pay a portion of your disposable income to your creditors. However, under Chapter 7 (straight bankruptcy), you can have a discharge of all your unsecured debts with no payment plan.
Your current income, entitles you to file straight bankruptcy under Chapter 7. I suggest you and your wife set an appointment with a competent lawyer who can handle your divorce and bankruptcy. We understand that filing bankruptcy or divorce is seems so final. Bankruptcy remains in your credit history for about 7-8 years. However, given your financial situation, there is a lot of benefit in filing bankruptcy. First, it will allow you to walk away from your unsecured debts (e.g., credit cards). Second, it will allow you to provide support for your daughter. Third, and most important of all, it will give you a fresh start from all these financial mess.
If you file personal bankruptcy under Chapter 7, you can file your all your debts, including the joint debts with your wife. This will discharge you from the responsibility of paying them. However, if she opts not to file for bankruptcy, then these creditors can go after her. Another option is for your wife to also file for bankruptcy under Chapter 13. There is a chance that she may be entitled to file under Chapter 7, but we have to examine her income and expenses and her dependents. It’s best that the both of you seek professional help from a competent attorney so that you can know all your options.
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