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I am a 52 year old male. I have been on a limited employment for 2 1/2 years only working less than 10 hours a month at a local department store. I have asked for more hours and have not gotten any. I formerly worked a job that paid $69,000.00 per year.

My wife and I have filed for bankruptcy and live with her sister and their family. My wife is now working making $450.00 clear.

We do have a car payment of $495.00 per month with some credit cards that total $1200.00 I am going to receive $8400.00 in the next month. We have made an offer to buy a home at $185,000.00 at $5200.00 down payment and $1350.00 per month.

What should I do with this $8400?

  • Is your wife making 450 after taxes per week? or per month? – Michael Pryor Mar 9 '11 at 22:10
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    how are you getting 180K financed if you filed for bankruptcy? – Vitalik Mar 10 '11 at 1:57
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    The mortgage offer is probably a scam -- someone is going to take a bunch of fees and run. Highly unlikely that the closing will be successful. – bstpierre Mar 10 '11 at 3:40
  • It is unclear as to when you have declared bankruptcy. Have you already declared bankruptcy and re-affirmed the car and card debt? Are you planning on declaring bankruptcy ? – chrisfs Mar 13 '11 at 1:22
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Do not purchase a house unless you are certain of the future method of paying off the mortgage.

From your description, you have $1200.00 in debt and a liability of $495/month. Your wife's monthly income is the only source of steady income you have and that is $450 (per month?).

Either way, the lump sum payment you are getting of $8400 should go to pay off your credit card debt. Next you should try to sell your car and use public transportation if possible. You should most definitely not take on a mortgage (given the specs you said, I doubt you'd even be approved).

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I am going to break rank with the some of the other answers a bit.

While I would normally advise paying down debt, especially high interest debt like credit cards, you are in the midst of a financial emergency and will be until you find full time employment. Right now liquidity is critical, and more important than a debt free lifestyle. Also, paying down debts that are likely to get mediated down/away during a bankruptcy now doesn't make a lot of sense financially.

So my advice is this:
1) Keep the money in a bank account and continue to limit your expenditures to the bare minimum until you are back on your feet financially with a stable income.

2) Do not buy a house. You absolutely do not need to be taking on more financial obligations or locking up your cash into a non-liquid asset.

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    +1 - if you have filed for bankruptcy, why pay off the debt? – MrChrister Mar 10 '11 at 2:35
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Pay off your debts (such as car loan and credit cards) starting with the highest interest first.

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    This would be good advice if he had stable income. If he doesn't have good job prospects and is going to have to live off his reserves then I would say that having cash on hand is far more important than paying down debt. – JohnFx Mar 9 '11 at 23:32
  • maybe for the car loan, but why not pay off the credit cards? you can always start using them again. I'd use at least large chunk of it to reduce the debt – Vitalik Mar 9 '11 at 23:49
  • If he is about to file bankruptcy, those cards might not be an option for long. – JohnFx Mar 10 '11 at 0:40
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    Credit cards are not an emergency fund! They can be canceled or have the limit severely reduced without warning. – bstpierre Mar 10 '11 at 3:36
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Use the money to pay down debt - you're not saying who much you're earning but from the 10h/month I'd guess it's not a lot either.

Knock off the credit cards, do something about the car (how much do the two of you earn in total per month?). If you've just filed bankruptcy, how would that house purchase work at all?

Also, just the house and the car payment alone would be around 1850, I don't think that you're able to pay for that and eat at the same time.

Really bad idea, IMHO.

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