Julie
“Dear Steve,
I have a failed business and am looking to bankrupcy to receive discharge from SBA personal guarantees and from personal credit card debt used in the business. My husband’s income puts us over the median in our state, I have already been advised by a lawyer that for this reason I will have to file Chp. 13 (I’m filing alone without my husband but still have to count his income.) Problem is, my husband says he will absolutely not pay his income toward my business debts (he’s upset I went so far into debt for the business) no matter what he has to do to protect himself. I have no idea how far he plans to go to protect himself, but, I know he has already taken steps in this regard by opening a separate checking account and changing his direct deposit. He told me he wanted to set-up a household budget and this was a cash management tool, to only put the money we have budgeted to live on each month in the joint account.
Right now I’m living in fear, my phone rings at least 50 times day by bill collectors. I want to resolve this situation. But, I’m afraid to discuss this with my husband because I fear he will file for separation or divorce. He acts like everything is fine as long as we don’t talk about financial matters. I guess he figures I’m just taking care of the problem without involving him. I began having severe anxiety and panic attacks when by business started to decline, that condition is worsening with the financial & marital worries and I’ve actually been hospitalized recently for a mental breakdown. I know if he files for legal separation or divorce he would be, basically, protected from being responsible for my debts or my bankruptcy filing. While that certainly would help me out by allowing me to file Chp. 7 without a problem. My fear is losing my marriage over my debts. I’m afraid that discussing the marital status at all in relation to my debt solutions will just cause us to start heading down that path and what if we never come back.
I’ve heard that in some cases where a spouse refuses to provide support for another spouse, i.e. that he won’t give me money toward paying my debts, that an affidavit can be signed or submitted to the court to this effect. Have you heard of this. What happens if I file Chp. 13, then I can’t pay because he won’t give me the money. If he’s not part of the filing, can the court or trustee garnish his income? Will it just convert to a Chp. 7 because I didn’t pay? Could it be dismissed altogether with no discharge? I don’t want to waste money filing if I’m going to end up right back where I started. It seems to me that I should be able to convince to court to just start at a Chp 7 due to the marital conflict and fact that my husband won’t support my chp. 13 payment plan. I can’t beleive that bankruptcy laws are drafted in such a way that they would force someone to get a divorce or separation in order to file.
Any suggestions would greatly help!
Julie”
Dear Julie,
Actually what we are dealing with here are a couple of overlapping different situations. I understand your desire to go bankrupt but what is most puzzling is your husbands head in the sand position. While he elects to gleefully ignore your situation and the suffering it is causing you, that is not constructive on his part.
So let’s separate your marriage situation from your debt situation. On the debt side of the equation there appears to be few options other than bankruptcy to allow you to remedy the current situation in your current financial state and income status.
On the marriage side of things, I think you need to ask yourself if this is the person that you want to continue to be married to. It does not sound like he is supporting you in the “for better, for worse” pledge. I can tell you that if I abandoned my wife in her hour of peril that would not be a loving action at all.
Is he willing to go to a marriage counselor to discuss the issues that are creating a wedge between you? If so, that would be a good place to go to begin to openly discuss the underlying relationship issues that are making this much harder than it needs to be.
It sounds like you have already consulted with one bankruptcy attorney about your situation. But a second opinion would be in order for you as well. Find another local bankruptcy attorney and go in and review the means test. You need to make sure that income that is used to service secured debt is not included as available in the calculations.
In a perfect world you’d be able to get your husband to go to marriage counseling at the same time you are seeking a second opinion for the bankruptcy situation.
The bottom line might just be this is a deal breaker for him and he’s just not willing to continue to be your partner in marriage as a result of your business problems. If so, maybe this situation has helped you to clearly see the man he is.
A final option is always to legally separate and then go bankrupt afterwards to help you get a fresh start. There is nothing saying that you can reconcile latter and get back together.
I called a bankruptcy buddy and ran this situation past him as well and we both agree, ultimately this is not primarily a debt problem, this is a marriage problem first and foremost.
Almost forgot, I have not heard of any free pass affidavit that can be submitted to the court to eliminate his income in this situation.
Here is an exceptionally big hug just for you.
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While you may have a huge debt load as result a failed business venture, that doesn’t necessarily make your a nonconsumer case. Your home loan is probably consumer debt and you must take that into consideration.
Any individual, even if self-employed or operating an unincorporated business, is eligible for chapter 13 relief as long as the individual’s unsecured debts are less than $336,900 and secured debts are less than $1,010,650.
In order to file for Chapter 13, you must compile the following information:
1. A list of all creditors and the amounts and nature of their claims;
2. The source, amount, and frequency of the your income;
3. A list of all of your debtor’s property; and
4. A detailed list of the your monthly living expenses, i.e., food, clothing, shelter, utilities, taxes, transportation, medicine, etc.
Married individuals must gather this information for their spouse regardless of whether they are filing a joint petition, separate individual petitions, or even if only one spouse is filing. In a situation where only one spouse files, the income and expenses of the non-filing spouse is required so that the court, the trustee and creditors can evaluate the household’s financial position.
Based on what I have seen so far, you are not ready to file bankruptcy. You have more important issues to deal with than your debtors. You need to work on your marriage…everything else is secondary.
Trying to fully address your problem in this is a bit like a doctor trying to treat a patient without a complete medical history. The best advice I can give you is to see a local bankruptcy and possibly a family law attorney as well.
Carl H. Starrett II
Law Offices of Carl H. Starrett II
1941-C Friendship Drive
El Cajon, California 92020-1144
Yes, very helpful comments all. I’m still swimming through all this information and trying to decide which route is the best for me at this stage. Steve, if you would run this question by your attorney friend it would be very helpful for me. I know in my original questions I asked about an affidavit of non-support, which someone had told me about. Now I’m on a different path…through my research I’ve learned that because my debts are primarily business related I’m not even required to complete the means test in a Chapter 7 filing. I do still have to complete Schedules I and J with my husband’s income…but only the portion he contributes to support the household, if I understand correctly. Also, if I understand correctly, the figures shown on Sch I and J are based on current and projected amounts, not the 6-month averages required on the means test, and further they are based on actual expenditures not IRS averages. I’ve put together some very conservative budget numbers and get very little disposable income. I’ve been told some jurisdictions may still put you into a 13 based on the I & J disclosures, but they only do so for people showing “substantial” disposable income on I & J, i.e enough to pay 50%+ back to unsecureds in a 13 or those paying for significant luxury items, like RV’s, boats, expensive vehicles, kids in private school etc. Thats not us. I’ve also been told that some jurisdiction are opposite…if the code doesn’t require the means test, there is no basis for the court to dismiss or convert a 7 to a 13. Any idea where Utah falls on this spectrum?
I think I may have had a bit of bad legal advice when I was told all above median wage earners in Utah must do a 13?
Please advise….
Julie-
I hope you understand what I’m about to say and why. I was in a VERY similar situation.
First, you’re a very smart woman. You have a problem and you’re trying your best to correct it.
I too suffer from severe anxiety (I don’t even leave the house), seriously, lol. So I know how it goes.
I just want to point out a few things:
You are trying to deal with things in the best and smartest way possible.
You obviously care about what’s going on and want to do the best you can to fix it. You wouldn’t feel so anxious if you didn’t.
Now, this is just my years of experience talking:
Your husband should understand that sometimes bad things happen to good people. It’s just the way it goes. Hey, you had the courage to follow you’re dream and start your own business, that takes a lot of guts.
Your husband should support you in trying to deal with the problems. Things are bad, but you are trying to deal with it. He should support that.
Your husband knows the stress you’re under. He should be supporting you, talking to you, and helping you figure things out. But he isn’t.
Sweetie, do what YOU need to do. I know it’s scary, but your husband isn’t concerned about you at all. He’s concerned about his finances/reputation. He doesn’t care about what it’s doing to you, he only cares about what it will do to him.
I’m sorry to say, but it looks/sounds like he’s looking for an excuse to skip out. If he was in the marriage for the long haul, he’d be understanding about what’s going on and he’d be supportive.
Yet, he has decided to distance himself from you and pretend nothing is going on and you’re not in agony.
You deserve better than this.
Maybe the marriage will end, maybe it won’t. Either way, you need to do what’s best for you. Afterall, he seems to be doing what’s best for him.
I promise you, even if things end, you will continue on and be stronger.
SUPER BIG HUGS.
Jen
PS- If you need/want to talk, Steve has my total permission to give you my email address. I’d love to email with you and give you my support in whatever happens.
Jen,
This is why I love my readers. You summed it up much better than I ever could. An amazing comment from an amazing person. Thank you so much for reaching out to Julie to help.
Steve
I am again speaking now not as a bankruptcy attonrey, but as a husband and a father. It is time to get a new therapist. Working on yourself before your marriage? Baloney! In a year, your husband will probably be gone. You have serious marital problems that need attention right now. Your husband is already planning his exit strategy…separate bank accounts, refusal deal with money problems and general lack of communication. Do you think putting off dealing with urgent issues in your marriage will help you situation?
And if your husband was such a fabulous guy, he wouldn’t be acting this way.
.-= Carl Starrett´s last blog ..Getting What You Need From Bankruptcy =-.
Julie,
I spotted that also, the separation of accounts. I agree with Carl, your husband is probably laying the ground work and bidding his time for whatever his Plan B is. Otherwise, why would he be nice as pie about everything else and only upset about the financial issue. Not a normal response unless he is masking his true feelings.
Maybe your therapist would be willing to facilitate a dialogue between you and your husband over this financial hurdle you are facing. This is not a situation that is going to be resolved in a helpful way by waiting to take action.
Carl and I are not trying to be mean or brutal here, just honestly sharing what we’ve both seen in our lives in helping people in financial trouble from opposite sides of America, I think he’s in California.
Steve
Thanks for the blunt but good advice. I agree with everything you all say and, yes, marriage counseling is definintly in our future. I’m currently in counseling for myself with my anxiety condition, but my therapist and I have decided I’m not in a good enough place to go begin dealing with the marriage issues as of yet. I’m dealing with my own severe mental issues right now, and I need to be good and strong within myself before I can work on my other relationships including my marriage. My therapist says I’m looking a solid year of taking care of my own well-being before I’m solid on my own two feet and able to cope with real life again. I also feel that if I can muster the strength to work myself out of the financial problems without bringing him into it, then I would be on a more equal ground or level playing field in working out our marital issues and reconnecting as true and equal partner.
In all fairness and in defense of my husband who is really a good man and a wonderful father, this is hitting him somewhat from left field. We have both had successful and busy careers, until my latest bump in the road, and I guess we just trusted each other to handle things appropriatly with our own affairs. I thought I was being very careful to keep all the debts in my own separate name to protect him. I knew I was taking risks but thought I alone would suffer the consequences, I had no idea that we could be forced to bring my husband’s income into a bankruptcy if it came to that. As with all marital issues, I do own half the blame here, and I’m living with a sense of guilt for having created the problems to begin with.
Right now I’m looking into other options for settling most of the credit card debt, and I beleive I have found a reputable consultant who can negotiate offers in compromise on the SBA guarantees. I’m checking his references right now but he states he files 100 of these succesfully each year with the SBA and generally settles for around 10% of loan balance. He indicates I have a pretty good case for the business’ failure, and his attitude is similar to mine…the bank didn’t get my husband on the loan to begin with, why would we expose him to the liability with a bankruptcy filing. The challenge is finding reputable companies to deal with in assiting with debt relief, and I’m not a very trusting person right now. The benefit with this route is once I submit this OIC, its generally a 6-12 month (possibly longer at this time) wait for them to reply and during that time there are no collections activities, so I get a bit of a breathing room during this waiting period. And, as the consultant said, they always reject 100% of the requests and then there is an actual back and forth negotiation for a couple of months to settle it. Then, he said, he generally gets a 30 month payment plan of settled amount. Thats government for you!
Anyone with referrals to reputable debt settlement companies would be greatly appreciated. Especially ones with flexible business models that will deal with my specific situation. For example, I may want to enter certain obligations now and perhaps add more later depending on my circumstances in say 6-12 months. I’m also hesitant of ones that require escrows as I’ve hear of them shutting down and taking your money with them. I’d rather keep control of my own money until there is a settlement to accept or decline. And, thats the one unknown at this point in time. Because of my mental condition, I’ve applied for long-term disability benefits and the insurance company is dragging their heels on a decision. Assuming I receive my benefits, then I have a lot more ability to deal with my creditors sooner rather than later.
At this stage, my attitude is almost against going the bankruptcy route. In addition to my husband’s objections with having to make the plan payments, I myself am not 100% certain its the correct resolution. The consequences can be devasating.
Please send me referrals if you’ve had good experience with reputable debt settlment companies.
I’m not sure I can see the benefit of pursuing debt settlement when you potentially don’t have the money on hand to settle now, it will leave you in collections, you may get sued by your creditors and it maintains or increases the stress and pressure on you. How doe that help you to get better?
Frankly, you are better off getting the protections from bankruptcy, filing a plan right now, repaying a portion of the debt through a Chapter 13 bankruptcy and closing the door on collections to ease your mental burden.
Just because your husbands income is factored into the bankruptcy means test, does not mean he has to pay anything or is obligated to pay anything. But if you are not working, don’t have cash on hand, and have no source of income yourself, how to you propose to repay any debts, through an OIC or settlements?
Steve
Although I am a bankruptcy attorney, I am writing from the perspective of a husband and father. Your husband sounds like a real jerk and I strongly urge you to seek marital counseling. Your husband’s failure to acknowledge your stress and suffering is mind boggling to me.
.-= Carl H. Starrett II´s last blog ..Getting What You Need From Bankruptcy =-.