Possible divorce and on disability

We got a question from one of our readers:

Any advice to the fact that I have been recently placed on disability and now possibly facing divorce and how to get the credit card companies to work with me on my fixed income and possible loss of husband’s income? I don’t want to file bankruptsy, but it is looking as if I might. I owe approximately 10,000. I live in Miami, Florida.

One thing people don’t realize is that even in a divorce or separation, debt collectors can careless (to some extent). All they really care about is getting their money and not hearing about personal problems. However, their is hope.

The first thing is to maintain at least the minimum balance until you can figure out how you’re going to pay things off. While avoiding bankruptcy is good, it’s not all that entirely life changing either. It actually gives you a fresh start, and by the looks of things you could file a Chapter 7 and be on your way in six months with a fresh start to life.

If however you have good credit that you don’t want to lose, I would pay the minimum, find out what the card companies can do to help you by calling them directly, and go from there. Also, make sure you find out how their methods to help you will affect your credit report if indeed it would. Then, like any other payment, set aside a certain amount each month (little more than the minimum) and have an end in sight. Ask them to help you calculate based on your interest rate how long would it take me to pay this cc off based on $xx.xx a month.

One thing to keep in mind is that even though you are divorcing, credit can still be ruined until your name is completely off your spouse’s debt. Thus, even if you hate him/her, you’re still responsible for their debt (as them as well) until all joint accounts are made separately. I would start there.

If your sole income is disability, creditors cannot touch that. It’s protected income. Work out a budget where you cover your four walls first (housing, food, utilities), then divide whatever’s left and send it to the credit card companies. It may be $5 a month. Send them written notification that you are divorcing and that your income will be disability only. Then, tell them how much you can send each month. (send the letter certified so you can prove that they received it) Yes, they’ll complain and threaten and not want to play nice, but they can’t do much else.

Bankruptcy isn’t as horrible as it’s made out to be. My hubby and I had to file back in 1999 (chapter 7). Since then, we’ve been able to buy four cars and a house. If you think that may be your only option, find a bankruptcy attorney who does the first visit free and go talk to them. Also consider taking out a payday loan – it may help you with urgent cash needs. In Florida we would recommend this company (payday-loans-florida.biz) – they have been around for 10 years and have a lot of great reviews.

The disability is a guaranteed monthly payment that they can garnish up to 35 %( like unemployment) of as I understand it which means they will be relentless in pursuit of this money. You are protected up to a certain amount of your income and assets no matter where it comes from or what you have then anything beyond that is subject to seizure or garnishment. That’s just how it was explained to me when we filed BK but I dont know the exact science of it all… I was told it was 75% or something that was protected as long as you fall under the ‘median income’ guidelines etc. I dont remember it all. BUT I have been told by others that if you have a guaranteed gov. check coming in monthly like disability or unemployment that they are aggressive because you are going to get that check and they can seize a percentage of it no matter what your situation. Again I dont know and maybe someone here does but I would be careful.

It’s the same for all states:

Social security benefits can ONLY be garnished for student loans, back taxes or child support issues. Credit cards are out of luck.

This is where people get confused. Disability is protected income but if you put it in a bank account for example and a creditor receives a judgment against you they can freeze that account and they often do this without warning. In some states those with these types of income are encouraged to separate accounts for wages that are protected and also garnishment laws are different state by state in terms of the amounts and what can be garnished etc. I think one of these articles mentions that in Florida the head of households wages-including earned wages are protected entirely. In the state of New York I think it said they can only garnish 10% of your earnings for example. Here where I live they can garnish up to 35% unless that amounts to be more then the federal law allows. Here are 3 links to three different articles that explain alot of things about garnishment in detail. Some of you might find them helpful.

http://law.freeadvice.com/estate_planning/asset_protection/protecting-wages-from-creditors.htm

Good luck!

Short Sale Question

Sale questionI am considering doing a short sale, and trying to weigh all of the ramifications and would like some advice or insight. We can afford our mortgage and pay our bills. Unfortunatley, our condo is a one bedroom unit, and I’m expecting in July. With the mortgage, taxes, insurance, homeowners assoc fee, and neighborhood fee, it’s close to $1,700 a month. If we are lucky we could rent it out for $900. Even if we lower the mortgage by a couple hundred dollars, it’s still not really feasible to rent. I really want out because the second hand smoke from our neighbor is out of control, and I don’t want my baby in that environment, plus it’s too small for three people.

We can’t do a traditional sale, we owe $176,00 and they are currently selling for about $110,000. If we do a short sale, how is that going to affect our credit rating. I was told only about 110 points. Is that correct? It’s only in my name, I bought before we got married, will my husband be affected? If anyone has gone through this I would love to hear their insights.

We are trying to do a short sale. The bank is taking forever to process our paperwork. We are current on our mortgage and all bills and was wondering if we stop paying our mortgage if that will help the short sale go faster. The reason we are using for the short sale is that I lost my job a couple of years ago and got a new one where I have to commute to another state. It now is no longer working to commute such a long distance. We owe more than it’s worth, and to rent comes no where near covering our expenses.

My friend told me: “It will affect your credit but I am not sure where you got the 110 points information. If your husband is not in the mortgage then it will not show up in his. Make sure if you do the short sale that it is a non-recourse and the bank does not come back at you for the difference. If the mortgage is strictly in your name and you do the short sale, then only your credit gets dinged and pretty bad. The note below is correct, make sure it is without recourse. BUT, when you go to make another home purchase and IF you put your name on it, expect higher than normal interest rates. The next home would almost have to be in just your husband’s name.” Is that true? Thanks.