[Val81]

Hi and thank you in advance for your responses and assistance. I am located in California.

I am in quite the situation. Here are the basics:

1. I am married and own a house for about 5 months with both my wife and I on title. I have equity right now but can't refinance until the Pre Payment Penalty is up.
2. I have 5 credit cards with the following balances:
a. $23,000
b. $15,200
c. $7,500
d. $10,000
e. 10,000
3. Everything that I have is currently on time and my credit profile will reveal no late payments EVER.
4. I also have a car that I am $20,000 upside down in currently.

The issues going on in my life have caused me to not be able to afford ANY of the above. I am considering calling the auto finance company and doing a voluntary repossession. I am also going to STOP making payments on all of the above mentioned credit cards. To protect myself and my wife, I will be removing my name of title even though I will remain on the mortgage loan and plan on making my mortgage payment on time and current.

My wife is not on ANY of the above credit cards or on my auto loan. From what I understand thus far, the credit card companies will blow up my phone, attempt to collect the amounts, and possibly sue me.

I would like to know if my wife's credit will be tarnished at all by any of this. Since she isn't on any of the accounts, I don't see how this could happen. My plan here is to refinance my house in just my wife's name in 2 years, pull cash out, then go back and settle all the outstanding debt I have racked up. Can someone please give me some advice on how I should proceed or any other consequences that I should be aware of?

Thank you in advance.

[Mr. Knowitall]

Don't do anything rash with the house title. The transfer probably won't offer you any actual protection, could jeopardize your wife's interest by making it vulnerable to attachment as a "fraudulent transfer" (a transfer made to bankrupt an estate in order to avoid paying creditors), may violate the terms of your mortgage, and your equity interest may fall under the homestead exception from collection anyway (and if that's the case there's nothing at all to be gained by taking your name off the house).

That said... you have a ton of debt, and... I assume you've lost your job or taken a huge pay cut? With no imminent prospect of gaining a similar income? You need to consult a bankruptcy lawyer.

I do not know if you would presently qualify for Chapter 7 bankruptcy (a discharge of debt), but you should talk to a bankruptcy lawyer about that option. With a Chapter 7 dischage you should be able to discharge all $65,000+ in credit card debt. If you choose to keep your car you should be able to discharge the $20,000 difference between the balance of the car and what you owe, or you could surrender the car.

If you either have to file Chapter 13 bankruptcy or choose to do so, you will be placed on a replayment plan over the next few years, during which time you will pay back part of the debt you owe based upon your means.

Your bankruptcy would not directly affect your wife's credit, although your credit score will be an anchor on any joint credit applications you and she make. If you're not planning to move, such that you won't be needing a mortgage, or she makes sufficient money to qualify for the mortgage in her name alone, that may not make much difference to you. Similarly, if she can afford to finance cars without having you on the loan, you won't be hit with the ridiculous interest rates people typically face after bankruptcy.

You can then work on getting your life together and getting your income back to its prior level, while rebuilding your credit. Bankruptcy does devastate your credit score, but so does the type of default you're describing.

[Betty3]

It looks like bankruptcy might be the best bet for you. If you don't pay your bills & get sued & get a judgment against you, since Ca. is a community property state, any debts incurred during your marriage your wife would also be responsible for. They can go after non-exempt assets, freeze bank accts., possibly garnish wages, etc.

[Val81]

Thank you for your responses.

So even though my wife is not on any of the current credit card accounts, she may still be found liable and the creditors may go after her?

Since I am planning on settling the defaulted debt within 2 years, is it still a better option to file for BK?

I have no assets aside from the house at the moment. Will the home be fully exempt from judgment lien attachments?

Thank you again.

[Mr. Knowitall]

Consult a bankruptcy lawyer about your options.

[Betty3]

Agree, you need to talk to a bankruptcy attorney about your particular situation. They will answer any & all questions you have & help you decide what is best for you to do at this time.