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Brent Blanchard
Brent Blanchard, Bankruptcy Attorney
Category: Bankruptcy Law
Satisfied Customers: 1975
Experience:  Twelve years experience in all aspects of debtor & creditor BK.
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My husband and I currently owe over $117,000 in unsecured credit

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My husband and I currently owe over $117,000 in unsecured credit card debt and unsecured line of credit debt. We are 56 & 57 years old. We are self employed artists, and in the current economy we have seen our income collapse. Our income for 2008 was $22,000. Because of our low income and the fact that our studios are in our home, we cannot qualify for a mortgage. We own our home (not completely finished) and the property it sits on, a 1996 Chevy truck and a 2003 Ford truck. There is no way we can currently pay this debt the way it is structured. Is it possible or worthwhile to try to negotiate something with them? We could only afford a total payment of around $500-$600 per month at the most. If we default, what will they do? What can we expect? Are we 'judgement proof'? What is your advice? I hate to default on this debt, but I feel backed against a wall. Thanks!
Several questions here,Customer but I'll be a good sport.

"Is it possible or worthwhile to try to negotiate something with them?" Possible in a general sense but I have seen firsthand NO successes from several attempts by people with and without attorneys or other "professionals" involved. The financial institutions are NOT acting in a very rational manner, in my opinion. The benefits, besides avoiding lawsuit and/or bankruptcy, would depend on how good of a deal can be struck.

"We could only afford a total payment of around $500-$600 per month at the most. If we default, what will they do? What can we expect?"

They can and usually do file a lawsuit to collect the debt. Once there is a judgment, they try to collect on it. First easy choice is garnishment of wages. More difficult for self-employed people, but I *have* recently successfully garnished monthly "salary" from a company owned by the judgment debtors, where the debtors are the only owners and employees.

If wage garnishment doesn't work or brings in too little money per month, the judgment creditor will try to locate "non-exempt" assets and force a sale of them. Just like a foreclosure on a house, there are legitimate and sometimes-inflated costs and professional fees associated with collection efforts and conducting a sheriff's sale, and trying to fight all but the most ridiculous charges is unlikely to succeed.

It can even go to forcing a sale of the house if its equity exceeds your state's "exemption amount" for homes. In FL, for example, the homestead exemption is unlimited except for settings of federal bankruptcy law. In Nevada, it's $350,000 (and adjusted for inflation, IIRC) with similar BK limits.

" Are we 'judgement proof'?" Can't tell for sure right now but you might be. However, most states allow only ONE car, not two. The pots and teacups (unless high-value collectibles) are exempt everywhere.

"What is your advice?"
This one is difficult because only a face-to-face consultation and establishment of an attorney-client relationship makes legal advice (other than "go find an attorney") on this type of setting inappropriate and most likely unethical. The terms of this site also prohibit direct contact between customers and clients (like exchanging e-mails or phone numbers).

I suggest considering all of your options and consulting an attorney who is familiar with debtor-creditor issues, including bankruptcy. Seeing a financial advisor would also be a good idea.

Your options are much stronger if that house is paid for. I hope you were not considering getting a mortgage to strip out equity and pay off the unsecured debts. Though honorable from the perspective of paying back what you can, debt payoff re-financing stretches the paid off credit cards or cars or TVs to a full 30 years (for most people) so the total interest paid is ridiculous, and puts the roof over one's head at greater risk if the financial situation does not improve. Non-legal advice: At times like these, we want to put money INTO our houses, not take it out. Perpetual debt is bad.

Thank you.

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