I just got back from consulting a bankruptcy attorney. I was going to write this in notepad while it's fresh in my mind, then I thought some of you might find it useful.
(1) Chapter 7 - complete bankruptcy. Debt goes away for good; clean slate. Requirements: less than $57,600 income for a family of 3, credit counseling (which is a joke--he told me we'd do that on the internet together if I decide to file), surrender assets. I think you can keep an old car and all your personal effects (like clothing), but I'm not totally clear on this. You can only do this once every 7 years and 11 months. Complete cost, including court and filing: $1850.
(2) Chapter 13 - Debt reorganization. Interest payment stops completely, and you make the monthly payments to the court. I'd need about $1400 a month for this--not an option, since I have zero income.
(3) Don't do anything. Stop paying the creditors altogether. Live off of remaining cash in the bank. This was by far the most surprising. Since my debt is strictly credit cards, it is unsecured. As long as I don't have wages to garnishee, there is absolutely nothing the creditors can do. I'm sure they'd whine bitch and moan through their collection agencies, but legally, they have no recourse. I'm surprised that they can't freeze my savings account. I'm going to have to make sure about this. Maybe he was assuming I'd withdraw all money from the bank first. (Glad I'm writing this; lets me organize my thoughts.)
(4) Use the threat of bankruptcy to secure settlements from creditors. The lawyer would offer 25 cents on the dollar. The way it's presented is by drafting actual Chapter-7 bankruptcy papers, showing them to the creditors (who would then see that I would most likely prevail in court, given the facts of my case) and telling them that they'll get either 25% or zero, their choice.
He recommends I take option 3 for now, get a good job, then file (option 1) within 2 months of securing the job & health insurance. (Income is a 2-year average, which means even if I get a great-paying job, my income would be below the threshhold of the new law.) His reasoning is that if I trip and fall the day after filing, without health insurance, I could rack up a huge hospital bill, which I could not eliminate in this fashion through bankruptcy. (I.e., he wants me to save this, the best card to play, for a better occasion.) He said option 4 is a crapshoot, and can be spoiled if any one of the creditors decides to play hardball. And in any case, it tends to take a long time. At first, I thought it would be the best way to go, since it avoids bankruptcy and collectors, but apparently not.
This is not some fly-by-night. The firm comes recommended by my mother's attorney, whom she's had for many years. For what it's worth. Hope no one here ever has to go through this kind of shit.
