Bankruptcy (Good or Bad)

[toddmingnworld]

OK here's the deal I'm broke, up in the a$$ in credit card debt, to the tune of 'bout $18,000 & working for half than what I was back in January of '01 when I bought my GN....I meet and spoke with an attorney, she claims I can be free of debt if I shell out $675.00 to her...She says that they can't touch your car or your house.....I'm planning on buying an old beater in a few
(Just something to get me around)

I guess I'm a little paranoid that they will be able to get my car
but because I owe money on it, the attorney says, I should be safe and also because it would be the only car titled in my name....I've been able to stave off making this kind of decision for
quite sometime but now it's all catching up to me....

Thought I might try to get some opinions from you guys to see if anybody out there has been where I'm going or might have to take this route in near future......

Todd

 

[6PacktoGo]

Bad. Been there, done that. Ruins your credit FOREVER, despite what they may tell you. Get a second job, deliver pizza, deliver newspapers, or something. Bankruptcy AIN'T worth it.

EVERYTHING you owe money on is included in the bankruptcy. Except the house IF it is current. You MUST declare every debt you owe to anyone under penalty of perjury.

Try this:

www.daveramsey.com

 

[squeeze87]

Have you tried debt consolidation or a credit counseler. I think some creditors would settle for less than owed when faced with bankruptcy. This decision will follow you for a long time, 7 years on your credit report. After that, any creditor will ask if you have ever declared bankruptcy befor extending credit. Bankruptcy can also affect your ability to get a job and even rates for insurance! I dont know all the circumstances involved,and not a personal flame, but people who spend foolishly and then just declare bankruptcy and walk away tick me off! Someone has to pay the debt. The cc company wont eat it. If you took the time to post this message, take a little time and see if you can get the debt reduced without declaring. A lawyer wants your money and will schmooze you into thinking its no big deal.

 

[toddmingnworld]

squeeze87,

I understand exactly what you are saying...Yes I did run the debt up but no I did have no control over my lay-off and subsequent drastic reduction in income....I take pride in paying my bills and am a responsible person...I tried debt consolidation for almost 11 months & once you cannot pay the exact amount the CC companies drop you from the program so in other words I am in a win-less situation....

I think I have exhausted every other possible option. Even at one point tried selling the GN but could not get a high enough offer/bid that would really pay creditors or anybody off....

I am certainly not one to spend $$$ foolishly and think those who do & declare are taking advantage of a system designed to help those who need it most...

Todd

 

[turbosam6]

What you can do is "re-affirm" on your house and car, meaning you keep them and the loan, provided its current. Thats what my father did when he went bankrupt.

I'm with squeeze87 here. PLEASE do not take this as a personal flame, I don't know you or your unfortunate circumstances, and I'm sure you're at the end of your rope here. As said before, try anything else first. Creditors would rather have some money than no money, and if you're threatening bankruptcy, they may be open to negotiations.

Now for the part where I sound like a prick: You say you are about $18,000 in cc debt, right? My dad said the same thing, and heres what I don't get: Did you run up the debt before or after you got laid off? I keep hearing this excuse, "Well, I was making x amount of dollars a year, but now I make less, and I was used to that budget." If the debt was ran up before you got laid off, then you must have lived beyond your means which can go no where but bad. If it happened after, why couldn't one just adjust his lifestyle to reflect his income? It can't possibly sound like a good idea to live off credit cards. I can understand racking up a few thousand while adjusting, waiting for things to sell or leases to come up, but my father and my other friends were upwards of $20,000. Somebody does have to pay this debt, why do you think every damn thing is so expensive? I just see so many people, my idiot dad included, spending recklessly and letting the rest of us sort it out, like the "Its not my problem" attitude. Bankruptcy was made to be a last resort, now people are doing it left and right, with only the responsible people left to pay. It does screw up your life. My buddy was too lazy to fill out his company paid insurance, and he broke his arm badly, causing him to declare bankruptcy at 20 years old. Now he makes a lot of money, but has to live in a trailer and pay out the ass on his interest on his vehicle loan. He could have paid the doctor bill, but he had cc debt from when he was 18, like an idiot, so he just went bankrupt.

Like I said, not to flame you or find fault, I'm not in your position. This was not a personal attack, just general frustration with our society and what we find acceptable. In the end, YOU are responsible for YOUR DEBT, not us. Try to find a better way out, you'll be better off. Aside from the credit thing, your reputations on the line, no matter how good a guy you might be, you'll come off as a deadbeat, people will stereotype you. Remember, when its all said and done, all a man really has is his integrity. People will admire your effort to pay your bills and take responsibility, but if you throw in the towel, it might stick with you longer than you'd think.

I wish you good luck, hope all goes well for you.

 

[GN One Day...]

Having worked in small loans, collections and now as a mortgage broker, I'll tell you what the attorney won't.
[soap box]
Once you've paid that money up front, they don't care anymore. They may put off filing for you for 3 mos, not caring about creditor calling and filing suits on you. After your case is closed, they won't do squat for you, and will usually charge you again just to get copies of paperwork they should have given you in the first place. These people are a dime a dozen and make money off of deluding the public into thinking that bankruptcy is no big deal. Not to mention car lots supporting that. It IS a big deal. Attorneys may know something about the law, but they don't know what credit is.
[/soap box]

Okay,
If this is credit card debt, go for a NON PROFIT, preferably state run credit counseling program. It looks bad on a credit report, and while you're in the program it is treated as harshly as a bankruptcy, in most cases (except for seedy car lots). It isn't as bad though after you get out of the plan (usually 36-38 mos.) These are only good for unsecured debts, i.e. credit cards and signature loans. If you have a secured debt, it doesn't apply although they may try. If you can't keep up with that, you should not expect to keep up with a payment plan in a CH 13 either. Your attorney is probably talking about CH 7, if you meet the requirements that allow you to file that way. No payment plan, wipes out unsecured debts. $18000 is a lot of money, but not insurmountable. You pay more for a car these days. You need to budget. Figure what you can afford and work out your repayment plan from that. Be realistic, don't over allow for petty cash and fun money. Work with your creditors through a good credit counseling program and you'll get out of it. Don't be impatient, that's what really drives people out of those programs. It's not that they aren't good, 90% of people in them just don't have the gumption to stick with it. Bankruptcy will stay on your credit for 7 years. You'll also get your debts discharged before you have a chance to show that you will pay on your own. You last tradelines will all be delinquent payments and charge off's. The house, as said, will be reaffirmed, or if behind on that, the past due balance will be included in the plan. If you fall out of the plan, expect foreclosure. You'd still be behind. Most people don't know what's really going on when they file and they become victims of a plan gone very, very bad, based on the advice of an attorney just trying to make a buck off of you. If CH 13, check your bankruptcy plan and see what the attorney is really making off of you. That $500-600 is just up front money, so that they know they'll make something off of you. They put the rest of their fee in the plan with your other debts. They know that most people won't make it more than 3-4 mos in the plan, so they collect that $500 or so up front so they are assured of making something.

*Remember, if you fall out of a CH 13 and are dismissed, or get out of line and delinquent in your credit counseling program, all bets are off and creditors will come after you like never before in a race to beat each other to judgment and collection.

To anyone else, keep only 1 credit card, and 1 for business use, if that applies. Don't use it unless you left cash and checkbook at home. Or online purchases, but same applies, pay it right back off. Keep the balance to something you can pay off in 1 payment--realistically. Credit cards aren't short term loans, they're for ease of payment and business expenses. Well, that's the theory, until they started making a killing when credit got rampant. I find life MUCH nicer by just using a check card and no credit card at all. I know how you feel Todd, been there and came through it with time. You can too. Without filing. Be patient and make the necessary adjustments.

 

[gofastr]

DON'T FILE A BANKRUPTCY!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

Ass hole lawyers will convince you that you will come out of it smelling like a rose (clean slate) It is bull ****. You will not be able to buy anything credit wise for the next 7 years. You will go down a shame spiral. The only reason that I would even consider doing it, is to save a House that you would otherwise be out on the street without. All that lawyer wants is his $675!!!!!

 

[John Larkin]

Do you have a 401k? If so, this is a scary move but potentially a fix: Take out a loan against it. Most 401k's have a loan program. You pay it back with interest but it goes back to you, not to a lender. The downside is that no one tells you that the moment you draw the money out, it is considered income in that year. However, the stock market is in the crapper still and we can plan for a slow recovery. By paying off the loans you are paying interest on, you are no longer paying interest; therefore, you are pocketing the interest money you'd normally be paying to someone else. In the long run, it can be a double win.

Also consider refinancing your house. Lower interest rates these days might reduce your payment by several hundred dollars over the course of a year. This would be more money to throw at your debt. Your lender might do the paperwork for free or low cost especially if they get wind you are considering the "b" word. Stay away from 2nd mortgages for debt payment; you have too many irons in the fire as it is.

Lastly, consider liquidating some assets via eBay. You might have a good bit of collectibles that someone would pay you a princely sum to have. $1000 worth of goodies would pay over 5% of your debt. Something to think about anyhow. Good luck.

 

[6PacktoGo]

Beware borrowing against your 401K, ESPECIALLY if the job associated with the 401K is not rock solid. IF you borrow against your 401K and then change employment status, you will have 60 days to repay the loan into the 401K and roll it over, or face around 40% in penalties. If you are already laid off or on reduced hours, do not borrow on your 401K if you have one. Only borrow against your 401K in order to save your home, and even then only if you have plenty of equity in your home.

Trust me when I say you ain't likely to borrow your way out of debt.

Do not add to your risk by taking out more debt against your home either. It is very unlikely that a credit card company will successfully sue you and win a judgement that will force the sale of your personal residence and or your only car. It most often takes forever for a credit card company to sue you anyway, and most won't sue if you just send them anything at all.

By the way, for the purposes of credit, you will be considered to have filed bankruptcy if you turn your credit issues over to a credit counseling company. Avoid Ameridebt, they are under investigation by at least two dozen state DAs.

On unsecured credit, like credit cards, you'll have to pay AT LEAST 20% of your unsecured debt under bankruptcy or the bankruptcy court itself will attach your income tax refunds for several years, among other things.

Many credit card companies will take a cash settlement of as little as 40% to 50% if you negotiate with them. But ANYTHING you do with ANYONE you get in writing with a notarized signature before you give them a dime.

 

[DKREDT]

Maybe the hard core way out... but what assets do you have to sell and put towards the debt? Anything of value purchased with the $18k in credit card debt? How about the GN? I know it is blasephemy, but you got to get your finanaces straight my friend.
Hope it all works out!

Joel

 

[RealFastV6]

If you have a large amount of equity in the house, refi and take the money out of the house. Bankruptcy is baaaaad, no matter what they tell you. Good Luck.

 

[turboscott]

Sell the GN and use that money to pay off some debt. If you still owe on the GN you will at least rid yourself of that payment and then take the money you were spending on that payment and insurance and put it into one of the credit cards. If you make any money on the GN at all throw it right on a credit card balance. Once you start making larger payments on the cards you will see the balances drop and get other cards with lower rates willing to let you transfer balances. Pay off the lower balances first just to get rid of the payments.

I was in really bad shape 3 yrs ago. I sold my GN and folowed these guidelines. Before I knew it I had NO credit card debt at all and I had a lot more money that I was used to. I bought a bigger house and now have a nicer GN than I sold to get out of debt.

Most important thing!!!!!! DO NOT PUT ANY MORE MONEY ON THE CREDIT CARDS. CUT THEM UP IF YOU HAVE TO. If you can't pay cash for it don't buy it.

 

[blackshoebox]

My .02c

...I'll go against the grain here.

If this 18,000 debt is spread out among a few creditors, I say, go on with you life, and ignore them. The process is simple: the debt will go from the creditor, to a collector, who will harass you, but you can send a notirized letter to the creditor and the collectors, and if they continue to call you and harass you, you can sue them for harassment. Chances are after a year of you blowing them(creditors and/or collectors) off, they will settle for anything(like .15 or .20 $ on the dollar) but at this point your credit is trashed anyway so why pay, so chances are they will write off your debt since it is a realatively small amount, and it would cost them(the creditor) more then its worth to try to get a judgement against you or put a lean on you home. If you decide to do this, just continue to pay your essential bills(car payment, insurance, mortgage) and put any large amount of money you make outside of your normal income(not likely but you never know, a good example would be a inharitance(sp) from a relative), in a safe or an IRA or mutual fund account which creditors can't touch.

If this debt is all on one credit card, they may go after you if you do what I described above, and put a lean on your property and/or garnish your wages, at which point I would get a job off the books. So therefore, you do not make any money as far as the gov't is concerned, so how can they garnish 0?!?

In the big scene of things, you debt is small, creditors go after higher profile cases of delinquency(50,000++ debt) with both guns drawn more then the small fish. Thats why if the debt is spread out among a few creditors, it is more likely you could get away with not paying or filing bankruptcy all together. And then wait about three years, and start over with a low balance card(that you may have to pay a high annual fee and high interest rates on) and start over.

..obviously the above posted is not the greatest thing to do, but in your circumstances, It is a better option the bankruptcy. Also chances are if you have not been making your payments your debt has been seriously inflated with lates charges and crazy penalty interest rates(this is in the fine print on your agreement with the creditor).

Good luck, email me or pm me if you want more info. Not that I condone not paying your debt, but sometimes you have to think of yourself, and say screw em. They are making millions anyway, trust me on that.

 

[Killa6]

Note to self: Don't ever sell anything to blackshoebox unless you get cash first.


I don't know toddmingnworld but my guess is he was thinking of himself when he got into this debt. Maybe you should encourage him to be responsible for his debt rather than hurting his credit. And besides, if he "thinks of himself" and blows off his creditors it will hurt him in the future if he needs to borrow money for a house, car, etc...

 

[John Larkin]

blackshoebox, that is the worst advice I ever heard. If you can't pay for it, you shouldn't buy it. Plain and simple, just saying "screw 'em" is stealing and there is no denying it. I hope you'll reconsider your advice.

 

[bwallace]

If you don't see a better salary in your near future file the bankruptcy! 18k in cc debt will take you 15 years to payoff. Anything you want to keep house/car (secured debt) make sure you are up to date with the payments in or out of bankruptcy. I won't begin to lecture you on CC's you probably already now your mistakes there, but screw the CC companies this is how they make there money by screwing people with high interest rates and high credit limits. The CC companies have already made their money back and are now just collecting interest. This is part of business for these companies. Although Bankruptcy Attorneys are at the bottom of the barrel when it comes to lawyers there are some good one's and it's worth the money to find one. A good attorney will be able to get you a plan that works for your income level and give you a chance to work your way out of the debt problems. As for 7 years of bad credit that's a joke the only real problem you will have is getting a home or personal loan. Those same credit card companies will be beating down your door to offer you credit, that goes for car loans and department stores. This is the toughest economy since the early 80's and will still be a few years before it turns around. Bankruptcy is there to help out people who honestly need the help and there is no alternative, which sounds like your exact situation. I was a Ch. 13 fraud investigator for 3 years after I graduated from college, the worst 3 years of my life, but I found that if you have a good attorney and have disclosed your complete financial situation, a good judge and creditors are more than willing to work with you to keep your house and car so you can become debt free. Also do yourself a favor do some research on bankruptcy laws in your state they are very different from state to state. I believe in paying your own way and have seen a lot of fraud in the bankruptcy area and filing a bankruptcy is nothing to be proud, but I have also seen people try and avoid bankruptcy in the end lose everything because they didn't file soon enough. This might be you're best way of getting back on your feet and helping to make you and your families life better.

 

[blackshoebox]

Originally posted by John Larkin
blackshoebox, that is the worst advice I ever heard. If you can't pay for it, you shouldn't buy it. Plain and simple, just saying "screw 'em" is stealing and there is no denying it.

I agree with you, but in his circumstances, he is on the ropes and is out of options. In that case, you have to do what you gotta do. I was just giving him legitimate advice(I work for a huge creditor). You have to remember for things like this you have to put you moral side on the back burner, and think like a business man. Good business man, only think about one thing and one thing only, the bottom line, not if its right or wrong, but what their wallet looks like after the smoke clears.

Again, I am not condoning this, but giving advice, that I would most likely use, if I were put in his unfortuanate situation.

Thats it.

 

[blackshoebox]

Originally posted by Killa6
I don't know toddmingnworld but my guess is he was thinking of himself when he got into this debt. Maybe you should encourage him to be responsible for his debt rather than hurting his credit. And besides, if he "thinks of himself" and blows off his creditors it will hurt him in the future if he needs to borrow money for a house, car, etc...

Not to flame you, but have you read the prev. post?? Todd is talking about bankruptcy which is the ultimate credit destroyer. I simply gave him another option, if that is the direction he is going. Granted it will hurt his credit, but so will bankruptcy. Again this is not advice that is glamous or nice, or even morally right in most peoples eyes, but it is legal.

Also, remember the old saying, Nice guys finish last. Which applies in this case. Lets say, he decided to work out a payment plan with the creditor, chances are he will be paying up to 20 % on the total amount(including the interest that has all ready acrude) he actually charged in late fee's and bogus interest rates along with additional processing charges. So if he had a grand total of 18,000, he will be paying back a whole lot more, if he wanted to pay it off in one shot, and even if he wants to make payments since the penanlty interest rate continues even if you arrange a payment plan in most circumstances, unless you use a good credit agency which can stop of the interest from accruing.

 

[GN One Day...]

That advice is, in fact, worse than bankruptcy. Especially if he quits his job to take one involving income tax evasion. You can count on your daily level of stress and constant humiliation going through the roof if you take that advice. Won't be fun when you have company and get a few of those calls. It would be preferable to file Ch 7 to wipe the unsecured debts and be in better shape in a few years, even with it on his credit report for 7. Advising simple non-payment is to sign him up for 20 calls a day from creditors. The card company won't hang on to it. They'll sell it to a collection agency for .30 on the dollar and be done with it. He could do something like that himself with a credit counselor, and they will restructure his account to show it is up to date after he makes 2-3 payments in the plan. He will already be repairing his credit. The other way, the collection agency has 3 years from the date of his last payment to continue collection attempts. They can file suit at any point. A judgment is good for 7 years, so that's a total of up to 10 years this could haunt him. He can be done with it faster with credit counseling or even the bankruptcy. If they know he's a homeowner, they are MORE likely to file that suit so they can put a lien on the house. He'd be unable to refi or sell unless they get to collect their money--which will be much higher than it is right now, probably double, due to fees and continued interest. I've seen it. Ignoring the problem doesn't just make it go away, it will compound it. Like I said, $18000 is a lot of money, but it is not insurmountable. CH 7 was not meant for money mismanagement. It's for people who rack up $100,000 in medical bills due to cancer or other that they just can't get taken care of through insurance. Bills they didn't ask for or willingly take on that TRULY have no end in sight. NOT credit card debt.

Do the credit counseling with a non-profit, state run organization. That's what it's for. IF you find a legit one, there isn't a charge to you. It is better than bankruptcy, repairs your credit while you work in the plan, you pay what you owe and it is do-able. Much better than ignoring the problem.

 

[blackshoebox]

Originally posted by GN One Day...
That advice is, in fact, worse than bankruptcy. Especially if he quits his job to take one involving income tax evasion. You can count on your daily level of stress and constant humiliation going through the roof if you take that advice. Won't be fun when you have company and get a few of those calls.

Privacy director on the phone will also rid you of the harassing phone calls @ home, and its illigal in the state of Florida to call people at work.(not sure about michigan) The tax invasion comment is hard to prove, especially if you know what you are doing, I am sure you know that. It is common practice in any job that involves tips, and/or most small business that do a lot of "cash business" and do not except credit. Again, thinking "morally" in any type of finance will get you no where fast.

You are right about the collection, but again if the amount is spread out among a few creditors, it makes a major difference, if it is all on one card, your advice is probably the better of the two.