Our Attorney is Advising Us to File Bankruptcy But I Don’t Know. – Andy


“Dear Steve,

About four years ago, my wife lost her job. She was having difficulty getting a job and used credit cards hoping she could get a job soon and we could repay them. Unfortunately, when she finally did get a job about six months ago (earning about 40% of her previous income), we are buried in about 120K of credit card debt, behind on mortgage payments, and suffering from depression.

I signed up for a debt reduction company but the problem is that you need to have $$$ to settle with the creditors. Given our situation, attorney is advising us to file for bankruptcy. Our income at this time is slightly higher than the ‘means test’ threshold but he thinks we can be fine with the means test; given that we have absolutely no means to pay back all these debts.

Secondly, while we would like to have a home, but owe like a $100K more on it than its worth. We have been trying to convince the mortgage company (LOAN SERVICER – Wells Fargo, LENDER – US Bank) to modify the mortgage for us, but instead it seems they just want to foreclose – even though they would get $100K more from us. This does not make much sense to me.

Sorry, I have two questions:

1. Is there anything you would suggest we can do to convince these (mortgage) people to modify the loan for us?

2. Do you think credit card companies would want to settle for 10% of the debt amount? I could come up with the 10% amount and not have to file for bankruptcy.


Dear Andy,

1. There is nothing you can use to persuade them to modify the mortgage if they don’t want to.

2. Creditors are not going to take 10% as a settlement.

What you need to know is that creditors do not make logical choices. They make choices as dictated by policies and procedures. In your case the modification refusal could be based on the fact that you are so buried in debt that you don’t fit their models. But the number of people that actually get their loans modified is very low.

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Banks always operate in their best interest and just because it does not appear commonsensical does not mean that their actions don’t maximize their profit.

I’d listen to your attorney. It sounds like if you discharged your credit card debt that you would then be able to afford your mortgage. Bankruptcy seems to resolve both issues.


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Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.
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