Need Advice on bankruptcy!!

[UNLVGRAD]

Hello.

I would like advice and information on bankruptcy vs. debt consolodation. I recently became ill and was in the hospital and on bed rest for over a month. Due to this I became very behind on my bills. I have over $20,000.00 in CC debt with about 5 different Credit Cards. I am a few months behind on them and the creditors are calling and send letters. My plan was to declare bankruptcy.

I would like some guidance on what I should do? Should I go forward with the bankruptcy, do debt condosolation?

Help!!

Thanks so much!

[littleroc02us]

Stop paying them. Don't answer their calls for a while. If you do, tell them that you will settle with them for pennies on the dollar. Stock money a way in the meantime.

[UNLVGRAD]

But what should I do? Bankruptcy or debt cons.? I had to take a pay day loan out a couple weeks ago in order to pay for one of my follow up dr. appointments. Well the check bounced and the pay day loan place called and said if I didn't pay they would sue me and garnish my wages. Can the CC companies do that too?
I'm back at work now but need to figure out a plan...

Thanks!

[skydivingchic]

We are going to need far more information before anyone is able to give you solid advice. If you want good advice we'll need to see your income, a list of monthly expenses, a list of debts with amounts, interest rates, and minimum payments. $20k may seem like an insurmountable amount of debt and it may be depending on your income. But it may also be very doable, again depending on income. I don't believe that CCs are able to garnish wages, but I have no idea about pay day loan places - read the contract you signed when you took the loan.

This forum does not tend to be a fan of bankruptcy or debt consolidation. Most people can work their way out of the debt if they try. But no one can advise you without the above information on income and expenses.

[UNLVGRAD]

Thanks.

I make about $50,000.00 a year. I have student loans ($180.00 a month) and two car payments (900.00 month). Those are my major bills. I guess I'm thinking since I'm a few months behind on the bills already is my FICO already shot?
Its so hard to find anyone to give me good advice. I was doing so well on paying stuff off until I became ill.
Thanks for the help!

[skydivingchic]

Yes, your FICO score has likely taken a hit already. That is rather irrelevant to the discussion, though.

The first problem I see is that you have no idea where your money is going. Where do you live? Do you pay rent or mortgage? How much do you spend on food each month? What about car insurance? How much are you spending on toiletry items, gas for cars, medical stuff, utilities, etc? Until you have a handle on where you money goes, it will be difficult to solve this problem. Your income is $50k. Depending on taxes and such, I'm estimating your take home pay at ~$2500 to $2900 per month. You've listed $1080 worth of expenses. Where does the other ~$1500+/month go?

Why do you have multiple car loans? $900/month is a ridiculous amount for vehicles and unsustainable on your income, even without the CC debt. How much are the vehicles worth and how much do you owe on them?

Debt consolidation won't do anything you can't do yourself (except give you 1 payment instead of 5). They will simply call your CC companies and negotiate a lower rate. You can do that yourself. Student loans are not dischargable in bankruptcy.

If you want good, solid advice, you have come to the right place, but the path forward is not likely to be fun or easy. The first step is figuring out where your money goes. Sit down with your bank and CC statements and figure that out. Make a list of your debts as well - car loans, student loans, CCs. Figure out interest rates, balances, and minimum payments. Once you have a more complete list of income and expenses, come back here and post them. This forum is full of smart people who are willing to help and cheer you on, but we can't do that without a good picture of what you are dealing with.

[disneysteve]

Originally Posted by UNLVGRAD

I have over $20,000.00 in CC debt with about 5 different Credit Cards.

Originally Posted by UNLVGRAD

I have student loans ($180.00 a month) and two car payments (900.00 month). Those are my major bills.

First you say you have 20K in CC debt. Then you say your student loans and car payments are your major bills. What about the CC bills? Those are probably pretty major, too.

You asked for guidance. I'd say exactly the same thing as skydiving chic. List your monthly take home pay, your monthly expenses and each debt with the outstanding balance, interest rate and minimum payment.

Is the 50K just your income or the total household income. Does your spouse work? Do you have kids? Give us the whole story and then we can do our best to help you sort things out and come up with a workable plan that hopefully doesn't involve bankruptcy. Forget about debt consolidation. That should never be a consideration. They do absolutely nothing that you can't do yourself.

[maat55]

I think you are splurging way too much on cars. You should not have 900 in car payments. If you are back to earning your regular income you are likely able to pay your debt, if you are willing to drastically change your lifestyle in the short-term.

I would start with downsizing your auto debt as much as possible. A second job would not hurt either. I would focus on the selling one or both cars in the short-term, then settle with the cards later. You do not need debt consolidation.

[jpg7n16]

Agree with Maat55 - sell the cars.

If you file bankruptcy, you'll lose them anyways (as they would be sold to satisfy your debt obligations) - so save your credit history, and your financial health. Sell the cars, pay down the debts agressively over time.

And yes, CC's can eventually garnish your wages - but both them and the payday loan place would have to take you to court before that could happen.

I feel it was a threat on their part (payday loan peeps). Until they take you to court, they can't garnish anything.


Your debt isn't even over 1/2 your income - you don't need bankruptcy, you need a budget.

[cypher1]

I'm sorry, but $900 in car loans each month? Don't get me wrong, I love cars too. I don't mean to be too judgmental, but with those payments, you could own a decent/reliable car with 6-7 of those monthly payments (IMO), and remove some of that stress for free.

[solvemybadcredit]

Well, I would definitely avoid bankruptcy if possible. It is just like the last option. You could consolidate and have a look at settlements, secured refinancing. Or sell whatever you have. Loads of people don't realize that they will be cut off credit for a long time after filing bankruptcy, including a basic current account.
Drop me a line and will talk it over or just give us more details.

[rugioz]

Consolidation may not be an option based on the damage to your credit. In your situation I would file chapter 7 on the credit cards and your auto loans. Time goes by quickly, and before you know it, the damage to your credit will be gone.

[littleroc02us]

Don't do either. Also, who cares about the FICO score, your not borrowing money anytime soon. Here is what you do:

1. Sell the cars, you'll have to drive a piece of crap car until you get out of this mess.
2. Put your student loans on Hardship deferment.
3. Start paying off your cc's smallest to highest balance. Pay as much as you can on the smallest and they will start dissapearing like dust in the wind. Pay them off with diligence, if they call don't answer.

[Seeker]

Originally Posted by UNLVGRAD

Hello.

I would like advice and information on bankruptcy vs. debt consolodation. I recently became ill and was in the hospital and on bed rest for over a month. Due to this I became very behind on my bills. I have over $20,000.00 in CC debt with about 5 different Credit Cards. I am a few months behind on them and the creditors are calling and send letters. My plan was to declare bankruptcy.

I would like some guidance on what I should do? Should I go forward with the bankruptcy, do debt condosolation?

Help!!

Thanks so much!

In response to your bolded question above, I'd recommend neither.

Debt Collection FAQs: A Guide for Consumers

This is the first thing I'd do: Send a certified letter to each creditor whom is calling you, stating that you do not wish to be called anymore. Covered in the section "How can I stop a debt collector from contacting me?" at the above link. They cannot harass you or if they continue to do so after receipt, you can report them to be in violation.

There are many other pages at that site which can be helpful to you.

Secondly, with an income of 50k, you should be able to take care of the backlog of debt. You've only really listed two debts... but the 20k backlog of CC debt can be financed with the $900/month you spend for two car loans. In fact, you can clear your 20k CC debt in 21 months from just those dollars. Without a listing of income verses expenses and debts, we cannot further advise you.

The reason most advise against Debt Consolidation is that usually they do not help you. Usually you pay a fee and they do not pay anything toward your debts until they can mitigate the total debt owed by you and thereby increasing the amount they make. You do not "make less" your debts, you just pay someone else to take care of everything but you still have to pay more than the total debt owed (you just are paying someone else to do that work.... but they get all the benefit and you gain nothing).

BK cannot be done blindly anymore. Just because you have had a bad medical situation, this does not exempt you from paying those debts. You are still working, and you have to detail out every dollar earned and spent before any judge will even look at your BK filing.

Most likely, you would end up with Chapter 13 (which is essentially a debt repayment plan).

BK is for life, though it does get off the 'records' after 7 to 10 years (depending on which type), but every time a loaning company or potential employer asks if you "ever" filed for bankruptcy, you will have to answer that with an affirmative. If you do not answer truthfully in writing, you would be commiting criminal fraud. BK is a LAST resort of people who have no alternative; with 50k a year, you have alternatives.

[cicy33]

Originally Posted by littleroc02us

Stop paying them. Don't answer their calls for a while. If you do, tell them that you will settle with them for pennies on the dollar. Stock money a way in the meantime.

Not always a good option anymore. used to be, but now they can send you a 1099 for the balance and you now owe income tax on the forgiven amount. Never mind that it is not income, generally it is the interest that has piled up.

[littleroc02us]

Originally Posted by cicy33

Not always a good option anymore. used to be, but now they can send you a 1099 for the balance and you now owe income tax on the forgiven amount. Never mind that it is not income, generally it is the interest that has piled up.

I've never heard of that happening. The Collection Companies will call and call and call, you can tell them that you will settle at a later time, but you don't have the money. What are they going to do, you don't have the money. When you do save some money, settle with them. It does work, you just have to be persistent.

[cjscully]

Originally Posted by cicy33

Not always a good option anymore. used to be, but now they can send you a 1099 for the balance and you now owe income tax on the forgiven amount. Never mind that it is not income, generally it is the interest that has piled up.

This has always been the case with debt settlement. The creditors are required to issue 1099C's any time they forgive more than $600 on a debt through settlement. This may or may not result in a tax liability for the debtor. If the debtor is insolvent at the time the debt is forgiven it may be able to be excluded from the debtor's taxable income. If the debtor is solvent this income may be taxable. See the IRS website for details, Internal Revenue Service. You may be able to exclude Discharge of Indebtedness income if client can show you are insolvent. For more information on tax ramifications of this program consult a tax preparer, CPA or Tax Attorney or refer to IRS Publication 908 - "Bankruptcy Tax Guide" and IRS Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness available on the IRS website.

Originally Posted by littleroc02us

I've never heard of that happening. The Collection Companies will call and call and call, you can tell them that you will settle at a later time, but you don't have the money. What are they going to do, you don't have the money. When you do save some money, settle with them. It does work, you just have to be persistent.

They could sue. Not being an attorney and not knowing the specific laws in the OPs state, I can't say what their exact options are in terms of executing any enforcement of the judgment. Despite JPGs statement that CCs could garnish, this is not always the case. BTW the threat from the payday loan company is a violation of the Fair Debt Collection Practices Act.

Debt Settlement may be a good option for the OP. Hard to say if there are better options for his circumstances without knowing if he is fully back to work and back up to his regular income.

[Bastille]

Bankruptcy does not hinder your ability to get new credit. I started getting new credit offers within 6 months and I started rebuilding.

[bjl584]

Sell the cars and buy a beater for cash. Then take that extra $900 and start chipping away at your other debts. You can dig yourself out of this hole without bankruptcy or debt consolidation. It will just take some dedication and sacrifice.

[littleroc02us]

Remember if you delare bankruptcy you will be in some serious trouble regarding your credit score for a long time. (7-10 years) It's a last ditch effort to stay afloat. Find another way.