Bankruptcy

[jmpride05]

Hi all,

-I have 62k in Student Loan Debt
-5k in Credit Card Debt (One I have not paid in 3+ months)
-Misc. credit records
-Owe IRS $500.00 (not much but still)
-$15,000 owed on car, never missed a payment though.
-And was late on my Student Loan debt which plummeted my score down to the 500 range.
(I wrote a letter trying to fix this)

Should I just declare bankruptcy and start from scratch? If I can't get an apartment or new car anyway with a bad score why should I bother paying this off?

My former EX, declared bankruptcy and has a better score than me?

[Weird Tolkienish Figure]

Hi all,

-I have 62k in Student Loan Debt
-5k in Credit Card Debt (One I have not paid in 3+ months)
-Misc. credit records
-Owe IRS $500.00 (not much but still)
-$15,000 owed on car, never missed a payment though.
-And was late on my Student Loan debt which plummeted my score down to the 500 range.
(I wrote a letter trying to fix this)

Should I just declare bankruptcy and start from scratch? If I can't get an apartment or new car anyway with a bad score why should I bother paying this off?

My former EX, declared bankruptcy and has a better score than me?

What's your income? What kind of student loans? Hope this doesn't become another drive-by posting.

That's not a completely terrible situation, believe it or not. We've seen worse.

[hamchan]

Unfortunately the student loans and IRS debt cannot be discharged except in very few cases such as permanent disability. You probably wouldn't be any better off unless discharging the rest of it means you can much more easily afford the payments on the student loan. Are the loans federal, private, or both?

[jmpride05]

What's your income? What kind of student loans? Hope this doesn't become another drive-by posting.

That's not a completely terrible situation, believe it or not. We've seen worse.

All federal.

58k

[Weird Tolkienish Figure]

All federal.

58k

I wouldn't bother with bankruptcy. Have you rolled up the federal loans into IBR or PAYE yet? Call direct loans and tell them, with your income you might be paying $4000 annually (about $333 a month) on PAYE or maybe $450/month on IBR.

With bankruptcy you will ruin your credit for a long time and will have to pay lawyer costs and it will do more harm then good IMO.

Edit: you should have a monthly payment much lower than that actually with your income. Do a calculator online and find out.

[hamchan]

Bankruptcy won't necessarily mess up your credit if it's already bad to begin with. My score was under 600 when I filed, and was over 700 less than two years later. There are some cards I can't get because of the bankruptcy, but my credit is still much better than it would have been if I hadn't filed. I made a concerted effort to rebuild as soon as my discharge came through though. You can't just be passive.

My attorney fees were about $1750 total. If you compare that to paying back over $20,000 it may be worthwhile. However the OP may not even qualify for a chapter 7 depending on his/her income.

OP, you should definitely be doing income based repayment or pay as you earn on your loans, if you are not already.

[disneysteve]

-I have 62k in Student Loan Debt
-5k in Credit Card Debt (One I have not paid in 3+ months)
-Owe IRS $500.00 (not much but still)
-$15,000 owed on car

Should I just declare bankruptcy and start from scratch?

why should I bother paying this off?

Why should you "bother" paying it back? Because you borrowed it fair and square and made a legally-binding commitment to do so.

Should you file bankruptcy? Absolutely not. You earn a good income and have what should be a manageable amount of debt. You owe about $82,000. I know that sounds like a big number but relative to your income, it really isn't.

There are a couple of things I would do immediately.
1. Pay the IRS. It's only $500 and you don't want that hanging over your head, even for a small amount.
2. Get yourself on a budget. You make enough that these debts shouldn't be overwhelming so figure out where your money is going, slash your spending as much as possible, and start throwing every penny you can toward the debt with the highest interest rate.
3. If you aren't already on IBR on the student loans, do that.
4. Consider selling the car. How much is it worth in private sale?

[dczech09]

You're not bankrupt; you're just scared and don't have a plan. And I mean that as respectfully as possible!

Let's break this down a bit...

Bankruptcy would only apply on the $5,000 credit card debt in the end.

Your student loans won't be discharged in a bankruptcy unless you meet the definition of 'undue hardship' (trust me, you don't based on your income alone).

Your $500 IRS debt will not be discharged in a bankruptcy unless it is a extenuating circumstance (it's not).

Your $15,000 car loan can only be discharged to the extent that the sale of your car does not cover the loan balance. Depending on your state, you may be allowed to keep the car and discharge the full amount, but it is unlikely.

So all in all, you would file bankruptcy on $5,000 to $20,000. Are you willing to go through the trouble just for that amount? Are you willing to pay almost $2,000 in fees for that amount of debt?

Once you start viewing things from this scope, you should realize that bankruptcy is not your answer. It will not solve your problems; it will just put a band-aid over a broken leg.

Why should you bother paying back the debt? Because you borrowed it and promised to pay it back. That is how loans work. You were not forced to sign the dotted line. And again, I mean all of this respectfully as possible.

What you need is a plan to get out of debt. You need to get on a balanced budget, cut costs, possible sell the car and buy something less expensive for cash, and maybe get some additional income going. But really, I do not think income is your problem. You make $58,000 in a country where the average HOUSEHOLD income is about $50,000! You make enough money to not have financial trouble!

Find places to cut costs. Think about selling that car. Find ways to make more money if necessary. And for crying out loud, get on a balanced budget. These things are not recommendations; they are necessities.

You could look into income-based repayments for your Federal student loans. However, there are MANY downsides to it. Also, with your income and student loan amount, you may be just on the edge of qualifying (depending on the type of IBR program). But really, your best bet is to just attack your loans as furiously as possible.

Bankruptcy won't solve your problem. It will have such a small effect on your overall situation. If you file, you will be back to square one very quickly.

Please let us know if you need more guidance. I feel for you, but at the same time, I know that only action will get you into a better situation with your money!

[nickthon]

One thing you need to keep in mind is that if you owe the money, you pay for the money. If you declare bankruptcy, they will take away everything from you, include your car. You received your education, so you need to pay back. That's ethical, hope they taught you that in college.

[CashUp Sammy]

I love the "why should I bother paying this back?".

I seriously don't believe you are in bankruptcy territory. Just because one individual made it out of bankruptcy with a decenct score does NOT mean you will be treated in the same manner.

The posters above have give you good advice. Place yourself on a budget, and chip away at it.

If you declare BR over this? what next?