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Chapter 13/Credit Counseling/Debt Restructuring??

New Contributor

Chapter 13/Credit Counseling/Debt Restructuring??

Hey guys!

 

It has taken me a while to get to the point where I could face the myFico community and ask for guidance on next steps.  For the record, I am beyond embarrassed.  I lay awake at night and am distracted at work during the day trying to come up with solutions to my debt problems.  That said, my story follows:

 

Two and a half years ago, my husband and I bought a house.  At that same time, I found myFico while trying to rebuild my/our credit.  I got great advice and I followed everybody’s instructions (both directly and indirectly) to the tee.  It all worked perfectly and within a year or so, I had amassed just about $200,000 in credit for the both of us – in unsecured cards and lines of credit.  Along the way, we had some house issues, family issues, dog health issues and personal issues.  Trying to keep utilization down on credit cards (because of my obsession with scoring), we then acquired a few loans.  Yes, those loans (Avant, Lending Club, etc.). 

 

So, here I finally am . . . and I need your help.    

 

Numbers:

 

The balance of the combined credit cards/lines of credit is around $150,000 and the three loans is around $51,000, giving us a grand total of $201,000, give or take (crazy, I know).

 

Our combined annual gross income, including overtime, end of year bonus, pension and rent from our nephew (for living in our basement) is $195,200 and our monthly net income is about $10,720.  For what its worth, I receive my $8,900 bonus in December, my husband has been handing out his business card looking for side work (he's a plumber) and I have taken the first several steps in starting a new transcription business -- I expect to launch around December or January.  

 

Our household expenses, including mortgage, car and truck payments, utilities, insurance and all credit payments are about $13,300.  As you can see, $10,720 (income) minus $13,300 (expenses) equals a monthly deficit of <$2,580>. 

 

Data points:  My husband was able to negotiate with Avant and get the interest rate down to 9% which, in turn, brought down our payment by a little over $100.  We tried to negotiate with Lending Club with no luck.  The very young sounding “supervisor” I spoke with told me that they do not negotiate terms because of their investors’ expectation of full payment, but that they do have an outside service that will step in . . . at some point.  I explained that if I declared bankruptcy, then a trustee would determine what their investors receive and it would be substantially lower than what we could come up with (but what do I know).  He just kept repeating his script.  I stopped paying them last month ($1,315 and $436) to help bridge the monthly deficit gap.   

 

I have been successfully (?) juggling our budget for months – but it is taking an emotional toll.  So far, I have only two accounts with late payments (30 days or more).  The mortgage is in good standing and has never been 30 days late (we have a fixed 3.5% interest rate that we do NOT want to screw up).  Our scores have tanked, so no chance for real debt consolidation or home equity loan:  EQ and EX:  Me-high 500s/Hubby-low 600s; TU:  Me-620/Hubby-650. 

 

What To Do:

 

We are contemplating Chapter 13, but are open to credit counseling, debt restructuring or anything else that anyone can think of that makes the most sense.  I have no idea which direction to go.  Part of me thinks we should hang in there (juggling) until more money starts coming in, but the other part thinks I am being overly optimistic.  I am not really familiar with credit counseling or debt restructuring (except that I did speak with a representative from some company yesterday who told me they charge 20% of the amount you bring to them, rather than the (i) settlement amount or (ii) savings amount), so I would appreciate information to go with whatever guidance or tips are given in the comments.  

 

Let me know if you need more information.  

 

Thanks so much.

 

(P.S.:  Please be kind.)

4 REPLIES
Highlighted
Established Contributor

Re: Chapter 13/Credit Counseling/Debt Restructuring??


dmc917 wrote:

Hey guys!

 

It has taken me a while to get to the point where I could face the myFico community and ask for guidance on next steps.  For the record, I am beyond embarrassed.  I lay awake at night and am distracted at work during the day trying to come up with solutions to my debt problems.  That said, my story follows:

 

Two and a half years ago, my husband and I bought a house.  At that same time, I found myFico while trying to rebuild my/our credit.  I got great advice and I followed everybody’s instructions (both directly and indirectly) to the tee.  It all worked perfectly and within a year or so, I had amassed just about $200,000 in credit for the both of us – in unsecured cards and lines of credit.  Along the way, we had some house issues, family issues, dog health issues and personal issues.  Trying to keep utilization down on credit cards (because of my obsession with scoring), we then acquired a few loans.  Yes, those loans (Avant, Lending Club, etc.). 

 

So, here I finally am . . . and I need your help.    

 

Numbers:

 

The balance of the combined credit cards/lines of credit is around $150,000 and the three loans is around $51,000, giving us a grand total of $201,000, give or take (crazy, I know).

 

Our combined annual gross income, including overtime, end of year bonus, pension and rent from our nephew (for living in our basement) is $195,200 and our monthly net income is about $10,720.  For what its worth, I receive my $8,900 bonus in December, my husband has been handing out his business card looking for side work (he's a plumber) and I have taken the first several steps in starting a new transcription business -- I expect to launch around December or January.  

 

Our household expenses, including mortgage, car and truck payments, utilities, insurance and all credit payments are about $13,300.  As you can see, $10,720 (income) minus $13,300 (expenses) equals a monthly deficit of <$2,580>. 

 

Data points:  My husband was able to negotiate with Avant and get the interest rate down to 9% which, in turn, brought down our payment by a little over $100.  We tried to negotiate with Lending Club with no luck.  The very young sounding “supervisor” I spoke with told me that they do not negotiate terms because of their investors’ expectation of full payment, but that they do have an outside service that will step in . . . at some point.  I explained that if I declared bankruptcy, then a trustee would determine what their investors receive and it would be substantially lower than what we could come up with (but what do I know).  He just kept repeating his script.  I stopped paying them last month ($1,315 and $436) to help bridge the monthly deficit gap.   

 

I have been successfully (?) juggling our budget for months – but it is taking an emotional toll.  So far, I have only two accounts with late payments (30 days or more).  The mortgage is in good standing and has never been 30 days late (we have a fixed 3.5% interest rate that we do NOT want to screw up).  Our scores have tanked, so no chance for real debt consolidation or home equity loan:  EQ and EX:  Me-high 500s/Hubby-low 600s; TU:  Me-620/Hubby-650. 

 

What To Do:

 

We are contemplating Chapter 13, but are open to credit counseling, debt restructuring or anything else that anyone can think of that makes the most sense.  I have no idea which direction to go.  Part of me thinks we should hang in there (juggling) until more money starts coming in, but the other part thinks I am being overly optimistic.  I am not really familiar with credit counseling or debt restructuring (except that I did speak with a representative from some company yesterday who told me they charge 20% of the amount you bring to them, rather than the (i) settlement amount or (ii) savings amount), so I would appreciate information to go with whatever guidance or tips are given in the comments.  

 

Let me know if you need more information.  

 

Thanks so much.

 

(P.S.:  Please be kind.)


I think talking to a BK lawyer (actually a few) is a very good idea. 

Ch 7 Discharge May 2015: EQ 588/TU 552/EX 570
Nov 2017: EQ 683/TU 660/EX 668 w/ 24% CC util reporting
Discover/Target/NFCU CLOC/NFCU Cash Rewards/PenFed Power Cash Rewards - $46k total revolving
Regular Contributor

Re: Chapter 13/Credit Counseling/Debt Restructuring??

First, good job asking for help! I know it takes a lot sometimes.

 

Step 1.

Find a nonprofit credit counseling center. Attend credit counseling. Take the in-person option if they  try to offer you over the phone or online. Even if it's an hour drive - just go.

They will go over everything with you. And I'm going to give you a spoiler alert: their debt management plan may not be able to help you. But go anyway. It's an option, and it sounds to me like it will help calm your mind for you to have pursued it.

 

Step 2.

Get on Google. Type in "debt settlement vs bankruptcy chapter 13" (no quotes). Avoid results that are obviously biased... but you'll see various opinions. This is how I learned that debt settlement requires you to make a lump payment, which requires saving that lump payment, which means waiting a period of time, not making payments on all those cards - damaging your credit heavily (much like you might before a BK) - and risking judgment being brought against you for what you owe. So it's a bit of a gamble. If you think you can do it rather quickly, especially if you have good family support, it might not be a big deal. For me, it would be a Big Deal(TM). You can read more on the Google bus at your leisure.

 

Step 3.

Do you or your partner have an EAP at work? Make a point tomorrow to call them up. I mean it - don't put it off. Ask for a referral to a BK attorney. Get an appointment set up. Gather every document they ask for and think up every single question you can. And ask for their email so that if you think of any on the way home and in the days following, you can save them up (don't bombard them) and send them in. 

Do they answer your questions to your satisfaction? Do they seem to have the knowledge in the areas of your specific case that you are going to need them to have? Do you get along, period?

If not - call that EAP up again and ask for a second referral.

And if necessary a third. (I asked for four... yes seriously, but then again the third one was due to an unfortunate accident my attorney had and I had to seek a new attorney :-\)

EAPs, the ones I've ever dealt with, are confidential from your bosses. You can ask that question straight up if you are nervous about that aspect.

You can also ask for word of mouth, or search the Internet for referrals. 

 

Best of luck.

Ch7 discharged 10/2017. Pre-file FICOs high 400s.
11/2017 EX 609; EQ 619; TU 558
New Contributor

Re: Chapter 13/Credit Counseling/Debt Restructuring??

Thanks, SteelerNYC.  I have already spoken with one bankruptcy attorney. I liked him.  Hadn't thought of checking out others, though.  


SteelerNYC wrote:

I think talking to a BK lawyer (actually a few) is a very good idea. 


 

New Contributor

Re: Chapter 13/Credit Counseling/Debt Restructuring??


capabk wrote:

First, good job asking for help! I know it takes a lot sometimes.

 

Step 1.

Find a nonprofit credit counseling center. Attend credit counseling. Take the in-person option if they  try to offer you over the phone or online. Even if it's an hour drive - just go.

They will go over everything with you. And I'm going to give you a spoiler alert: their debt management plan may not be able to help you. But go anyway. It's an option, and it sounds to me like it will help calm your mind for you to have pursued it.

 

Step 2.

Get on Google. Type in "debt settlement vs bankruptcy chapter 13" (no quotes). Avoid results that are obviously biased... but you'll see various opinions. This is how I learned that debt settlement requires you to make a lump payment, which requires saving that lump payment, which means waiting a period of time, not making payments on all those cards - damaging your credit heavily (much like you might before a BK) - and risking judgment being brought against you for what you owe. So it's a bit of a gamble. If you think you can do it rather quickly, especially if you have good family support, it might not be a big deal. For me, it would be a Big Deal(TM). You can read more on the Google bus at your leisure.

 

Step 3.

Do you or your partner have an EAP at work? Make a point tomorrow to call them up. I mean it - don't put it off. Ask for a referral to a BK attorney. Get an appointment set up. Gather every document they ask for and think up every single question you can. And ask for their email so that if you think of any on the way home and in the days following, you can save them up (don't bombard them) and send them in. 

Do they answer your questions to your satisfaction? Do they seem to have the knowledge in the areas of your specific case that you are going to need them to have? Do you get along, period?

If not - call that EAP up again and ask for a second referral.

And if necessary a third. (I asked for four... yes seriously, but then again the third one was due to an unfortunate accident my attorney had and I had to seek a new attorney :-\)

EAPs, the ones I've ever dealt with, are confidential from your bosses. You can ask that question straight up if you are nervous about that aspect.

You can also ask for word of mouth, or search the Internet for referrals. 

 

Best of luck.


Thanks, Capabk for your very thorough and thoughtful suggestions.  I will start googling and making calls.

 

On a slightly different -- but related -- note, I notice from your signature that you included a credit union in your bankruptcy.  Part of my resistence to bankruptcy is that Navy Federal constitutes almost half of our total debt.  I have been with them for about 10 years and just love them.  Both our sons and nephew now bank with USAA and a while back, I applied for membership for my husband with them and was accepted , but we do not currently have any accounts with them. I don't know if you had particularly strong bond with PSECU or you are still with them, but I am interested in knowing how you handled your account(s) with them through your bankruptcy.