Monday, May 28, 2007

The Creditors Meeting - Part 5

This day finally came. We're (my wife Jenni and me) at the Federal building early, about half an hour. We were told to be there early to have plenty of time to get through the security. The place we need to be is on the third floor. As we come up around the corner, there is two people sitting in this empty hall way. The door is locked. Its really quiet. So we sat down trying to not make too much noise as the old waiting room chairs squeaked. There was still about 28 minutes left till our "appointment". There was a clock on the wall so we just sat there quietly as the minutes passed.

A few more people started to come up. Then a heavy-set man with a black rolling suitcase came up. He stood there for a minute and then walked off, leaving the suit case there, right in the middle of all the people that were here. I didn't feel very comfortable with that. All the terrorism news make me a bit paranoid about these kind of things. Jenni suggested that we walk around the corner because she also wasn't very comfortable with that. Then as we walked, the man that left the suitcase was on his way back, he just went to the rest room. That made both of us feel a lot better.

About five minutes to 9, the presiding "Judge" opened the door and we all started pouring into the room. This wasn't the court room you always see on TV, this was a room that reminded me of a classroom. There was rows of foldable chairs and in the front of the room was the "bench". They took 2 "lunch room" tables and slid them together to make one square table.

It is time. The judge called another couple first then us. As we came up to the bench, our attorney met us there at the big table.

He asked to see our driver licenses and social security cards as proof of identity.

The judge asked us,
"Do you swear to tell the whole truth, and nothing but the truth?", we said, "yes".

So he went on, "Do you own any real-estate?","No", I replied.

"Have you ever owned any real-estate?" he asked, "Yes" I said.

"What happened to it?", "We sold it in 2004" I answered.

"What happened to the proceeds?" he asked, "There was none", I replied. (We sold the house at a loss).

He flipped through our file, signed the last page and let us go. The entire thing lasted about 3 minutes. We still had about 45 minutes in the parking meter when we got to the car.

"So what now?" I thought. Later that day Jenni called our attorney and asked what happens now, she said "Hopefully nothing". The creditors/court has 60 days to file any appeals or bring up any issues. Within the next 60 days we should receive a letter from the court that will state that our bankruptcy is final.

I guess we have to wait some more. I can't wait till I can start rebuilding our credit.

Tuesday, May 15, 2007

Get The Ball Rolling - Part 4

The Yellow-Pages Directory is filed with bankruptcy attorneys. I called a few, about 8 and got their rates. Here in Spokane, the attorney fee for Chapter 7 is $450 and the court filing fee is $299.

In March I got the tax return and hired my self an attorney. Wow, the collections calls stopped. Sometimes I just let it ring. I forgot that I had to answer it when it rang.

The Consultation

At the consultation with the attorney, she asked me a bunch of questions. I had to bring all the financial records (tax returns and pay stubs). It all seemed to be so rehearsed and simple. The attorney has done this so many times before, plus the software she uses is so automated that it’s all just a matter of answering questions. Reminds me of doing taxes at H&R Block. You just sit there while the machine does the counting. When it’s done it spits you out a receipt and you’re on your way. Same here, the consultation lasted about 20 to 30 minutes. I was given a check list of things to bring (most recent pay stubs and bills) by a due date.

After all the necessary papers were submitted to the attorney I had to wait for the filing date which came quick, March 24th. This attorney really knew what she was doing. She told me it could take up to a few months to file but here we were, not even a month. A few weeks later I received the notification from the bankruptcy court that informed me of the creditors meeting date of May 8th 2007. More waiting.

To be continued…

Filing Bankruptcy - Part 3

In October of 2006 I stopped making any more payments to the credit card companies. No sense of paying if I’m just going to file bankruptcy anyway. I could hear the collections calls ringing already.

It cost a few bucks to file bankruptcy I found out, about $700. Here I am broke, with collection agencies hounding on the phone and I don’t have the money to file bankruptcy. I came up with a clever plan to get this taken care of. I knew I had about $3000 coming in tax returns, but that was not going to happen till February or March of next year. The plan was genius but I had to mentally prepare for the collections calls for the next 4 to 5 months.

I have a few words to say about the collections agents. They are annoying!!! Which probably works great for them but I had enough by November. I quit answering the phone. If I try to be nice and answer the phone and nicely explain to them that I am filing bankruptcy, they want the attorney’s name and the phone number. But I don’t have that, I can’t “claim” an attorney until I pay them. So they continue, “I understand that you are going to file bankruptcy but you need to make a payment to get your account current, how would you like to make the payment, we except check over the phone…”. Why would I file bankruptcy if I COULD get my account current? So I quit answering the phone for the next 4 months.

Back to the bankruptcy. It didn't take me long to find out how all this works. A few searches on Google and I had the basics down. I live in Washington state so this may only apply here but you can find out about your state simply by doing a search in Google for "filing bankruptcy in Washington" and substitute "Washington" with your own state.

Basically, there is two ways I could go, Chapter 7 or Chapter 13. Being an individual, these two options are most common.

Chapter 7

The simplest "start fresh" bankruptcy is Chapter 7, this is the one I filed. When an individual files Chapter 7, all the credit debt gets dropped with few exceptions like debt to government, etc. There are some rules to qualify for Chapter 7. Number one thing is, all your income has to equal to your expenses, Anything left over, the court will take it and award it to the creditors. There is also limited amount of personal belongings that you can keep, like if you own a house for instance, you can only keep $25,000 of equity in your primary residence. Any additional real-estate may be foreclosed. A car can be worth up to $5000 and so on. If you don’t own a house, the $25,000 limit may be applied to a car maximum amount. If you are truly unable to pay the debt, Chapter 7 is the easy fix.

Chapter 13

If you do not qualify for Chapter 7 because you own too much personal property or your income is more than your monthly expenses, Chapter 13 is your option. When you file Chapter 13 your debt will be evaluated and depending on how much personal property the court can take and how much money you have left after expenses, the court will setup a plan for repaying the debt. You will have to pay a specific amount every month.

This is just an overview of the bankruptcy options and from this information you should be able to get an idea where you fit in.

If you really do not have any other option but to file you should file Chapter 7, otherwise I would figure out some way to settle with the creditors and avoid the big “Filed Bankruptcy” note on the credit report for 10 years.

If you qualify for Chapter 13, I think there are options to avoid bankruptcy. Sell some property and pay off a chunk of the debt, use the extra money in your income to pay down the debt.

I had no choice, I didn’t own any real-estate property, the pay check from my new job was just enough to pay the bills. I qualified for Chapter 7.

The "Bondo" Hit The Fan - Part 2

The shop didn't have the necessary equipment to really go big time so I had to make what I had work. My days were filled with work, even staying late some evenings. I noticed that because of the fumes in the shop my nasal passages started to enflame in the evenings and last all through the night. I was having trouble breathing at nights and sometimes woke up trying to catch my breath.

By this time the credit card bills are rolling in, in total of about $800 to $900 per month. My business was hardly making a profit at this point. I had to figure something out. I need to do more marketing so Mondays became my marketing days. I gained a couple of used car dealers that I did work for and a month later I started seeing some profit. Everything seemed like it was falling in place except my breathing was getting worse and worse.

In September of 2006 I actually made about $3000 profit, the business is growing. My health on the other hand was getting worse. I had to make a decision, September became the last month of me being self employed.

My credit debt by this time was $26,000 and growing. The over the limit fees were racking up and my monthly bills now were about $1100 per month. So far I have not missed one payment and have never been late with one.

Getting a job was my only choice now, and again, I had the two choices, computers or cars. I went with a computer field this time and got me a job. It paid enough for my family to live month to month, paycheck to paycheck. There was not enough money to pay the credit card bills. This is when I decided that I had no choice but to file bankruptcy.

Saturday, May 12, 2007

The Great Idea - Part 1

Bright Ideas, they spawn in my mind all the time. When I eat, work, sleep, they surround me. I sometimes think "That's it, I need to let off, just rest, enjoy life as it is for a while." A while would pass and I'm back at it again.

Working on cars is one of my passions that I've been practicing as a hobby since 1994. Chasing a dream has been going on ever since I can remember. So on this sunny, North-West, August afternoon, the supervisor at my job has announced that the company is closing the doors and we are all laid off.

It came as a bitter-sweet surprise to me. I really liked my job - it was as close to my dream job as I think I could ever get to. My ultimate "dream" was to work for Lamborghini in Italy but I knew that I would never do that simply because I love USA and would not move to any other country. This company was a small car developer where my job was to design and fabricate body parts for the new Merlin Roadster.

While working at this company I was toying with a possibility of "flipping" a house, thanks to the Flip That House show. Since I didn’t have any money saved up, I decided to use credit cards to do all the repairs.

The surprise of having no job shocked me, I wasn't sure what I was to do. My choices were to either go into the computer and internet field or the auto body repair field of work, I had extensive experience in both. But there was this temptation to just go all out and start my own business. I felt like I was pushed out and given the opportunity to see what I've got.

By this time my available credit was about $22,000, and this was from all of about 15 credit cards. My credit score by this time was dropping because I applied for so many credit cards all in one month. So I had to make it work with what I've got and not count on more credit coming available any time soon.

The computer field is great but I wasn't sure what online business to start but I did know plenty in the auto repair business so that was my decision.

Auto body shop was going to be my first real business. My $22,000 credit should be enough I figured because I was going to do it on the small scale.

In September of 2005, The Rudd Shop was born. The first 5 months was slow and after some advertising in the local paper, classified ad publications and craigslist business started picking up.