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Regular Contributor
Posts: 247
Registered: ‎09-10-2013
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Claiming Bankruptcy - keeping some credit cards

I can't even begin to describe how embarrassed I am for even considering BK, but I am paying out more than I make in a month. I pay my cell, internet, gas for my car and buy food on my credit cards just so I can afford to pay my credit cards (makes sense huh?) THEN, I took out a $14,000 consolidation loan to get rid of credit card debt and have just one payment, but as life tends to do, it handed me many other obstacles, which in turn ran up my credit cards again. Oddly enough, everything is somehow paid every month and I have no accounts in poor standing (which makes it even harder to make this decision).

 

I have 2 Cap. One cards, 2 Chase Cards, an Amazon card and personal loan that I would include in the BK (a total of @ 29,000). I have six store cards, plus a Walmart, Amex Business, Amex Blue and Credit One cards that are all at zero balance, so they would not be included in the BK. I've also got a brand new lease (since August 2016) and a motorcycle loan that I would NOT be looking to put into the BK.

 

My question is, given the amount of cards & loans I would still hold on to, after BK, how long do you think it may take to build my credit back up again? Also, how much should i expect my scores to plummet? Currently they are fairly low 644, 651, 631. I'm assuming they will go down drastically, but with the mix of loans / cards I would still have, I thought that I could raise the scores fairly quickly utilizing the cards correctly.

 

I've already contacted a bankruptcy lawyer but I've been stalling for the past couple of days because I haven't convinced myself that this is the right thing to do.

 

Help! Smiley Sad 


Starting Score: TU 607, EX 606, EQ 611
Current Score: TU 675, EX 671, EQ 654 - FAKO scores TU 744, EX 735, EQ 728 - I wish these were my real scores!
Goal Score: 750 across the board. Simulator says 806 if I stay on track for 24 months
Established Contributor
Posts: 1,429
Registered: ‎03-28-2017
0

Re: Claiming Bankruptcy - keeping some credit cards

[ Edited ]

When you file bankrupcty (BK13) you will report ALL your credit accounts including those with $0 balances.  The trustee will contact everyone letting them know you're filing BK that have a balance but the accounts that have $0 will probably discover your BK when they SP your reports and they may close you.  Best to close those ahead of filing BK.

 

The right process is to close accounts at $0 now so you can hope to reopen them when you recover from BK and your FICO scores allow.  Trustees will ask you to close accounts but you're not required to do that.  If you have a good reason for not closing some accounts, the trustee won't fight it because it isn't required.

 

$29,000 sounds like quite a bit but if you can raise $300-$600 extra a month with a second part time job (or third, or drive Uber, or shop for Instacart, or whatever) you can pay that down in 4-5 years without BK.  If you do BK, you can probably recover in 2 years or less because you have no late payments yet.

 

Read this article: http://www.creditcards.com/credit-card-news/card-accounts-closed-bankruptcy-1294.php

 

It discusses why bankruptcy in your case is a poor solution.  Bankruptcy makes sense for people with medical issues or who lost a job or whatever.  In your case, the symptom isn't medical or job loss, it's poor spending habits that you admitted in your post.  Working an extra job (or two) to get out of debt without BK may help force you to live by a budget.  

Regular Contributor
Posts: 247
Registered: ‎09-10-2013
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Re: Claiming Bankruptcy - keeping some credit cards

ABCD2199,

 

Thank you for that information. That kind of stinks! Smiley Sad I was hoping that given that the cards don't have a balance, they would somehow be "protected" and not hae to be closed. I don't care about closing the store cards since I never use them anyway, but what about if the AMEX cards and the Walmart card had balances - would I HAVE to include those or could I keep them to help rebuild after the BK? Or would I face the possibility of them choose to shut my accounts when they hear about the BK?

 

As for a second or third job ... I would GLADLY do that if I had time to do so. I have a family situation that prevents that - and, along with a regular full time job, I am also getting my bachelor's so I don't have much time for anything else these days unfortunately. Smiley Sad


Starting Score: TU 607, EX 606, EQ 611
Current Score: TU 675, EX 671, EQ 654 - FAKO scores TU 744, EX 735, EQ 728 - I wish these were my real scores!
Goal Score: 750 across the board. Simulator says 806 if I stay on track for 24 months
Established Contributor
Posts: 1,429
Registered: ‎03-28-2017
0

Re: Claiming Bankruptcy - keeping some credit cards

Do you rent where you live now?  Can you downsize or get a roommate?

 

When do you get your degree?  June 2017 or "years in the future"?  Will that degree help you get a raise?

 

Have you talked to your boss about taking on even one extra shift here or there?  $300 a month extra would be huge.

 

When people ask me if they should file BK, I always force them to make a list of every asset they fully own (no loans against) and go to eBay and find out what the value of those items totals up.  Selling the xbox and TV and other stuff seems painful and harsh but it can be a nice amount to put towards debt reduction.  You spent $29,000 on SOMETHING, might be time to inventorize those assets and liquidate them even at 10c on the dollar to pay down debt and give yourself some breathing room.

 

Summer is coming up, are you taking summer school?  If not, put the class time towards more jobs.

 

BK just doesn't feel like a solution if after 2 years you are right back up to being burdened with debt again.

Regular Contributor
Posts: 247
Registered: ‎09-10-2013
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Re: Claiming Bankruptcy - keeping some credit cards

And I feel I need to express how I got into this predicament to begin with so it paints a clearer picture.

 

About 5 years ago I started a small business. During this time, I accumulated an excessive amount of credit card debt trying to get the business off the ground. This wasn't an issue given that I was engaged at the time and technically had two incomes for the bills. Unfortunately, that did not work out as planned. When we split, I had no savings (all my money had gone into trying to get the business off the ground) and then added the expense of moving, etc. Well that compounded the issue and it's been extremely overwhelming trying to figure out how to pay everything now with one income and nothing in the bank. So, I busted my butt and did work two jobs for the first year after the split. A family emergency (medical - not mine but another family member) has taken over a piece of my life so I am not able to work a second job now.

 

It's now been two years and I just keep getting deeper and deeper in debt and have barely been able to keep my head above water. So, it is not due to poor spending habits, it's due to an extreme lifestyle change that I had no control over and I've done the best I can with what I have. At this point, I'd like to try to keep what I can (given that it's ALL in good standing).


Starting Score: TU 607, EX 606, EQ 611
Current Score: TU 675, EX 671, EQ 654 - FAKO scores TU 744, EX 735, EQ 728 - I wish these were my real scores!
Goal Score: 750 across the board. Simulator says 806 if I stay on track for 24 months
Established Contributor
Posts: 1,429
Registered: ‎03-28-2017
0

Re: Claiming Bankruptcy - keeping some credit cards

Yep, I've been there with a failed business.  My 3 derogatories on my credit report are all from a failed business myself -- even though I had very high income every month for the past 19 years, I didn't even know those debts were charging off because I made a poor decision with a business partner who hid a lot from me and I stopped credit monitoring years ago because who needs to spend $15 a month on that?  Bad decisions for sure.

 

If it really means you won't get your head above water, bankruptcy exists for that reason completely, but make sure you know what it entails for the next few years and what happens if you file and want to change your mind.   Bankruptcy lawyers are not your friend, they're there to charge their fees and their advice may not be in your total best interest in every situation.

Regular Contributor
Posts: 247
Registered: ‎09-10-2013
0

Re: Claiming Bankruptcy - keeping some credit cards

Do you rent where you live now?  Can you downsize or get a roommate?

I live in a small one bedroom right now already. It's cheap for the area I live

 

When do you get your degree?  June 2017 or "years in the future"?  Will that degree help you get a raise?

My degree is years away (around 2.5) - but this isn't an expense. The company I work for is paying for that - and yes, it will assist me in getting a higher paying job.

 

Have you talked to your boss about taking on even one extra shift here or there?  $300 a month extra would be huge.

I cannot take on any extra work. I gladly would if I could, but I cannot with other obligations unfortunately. I have worked multiple jobs in the past, I am certainly not against it, but it is not feasible at this time.

 

When people ask me if they should file BK, I always force them to make a list of every asset they fully own (no loans against) and go to eBay and find out what the value of those items totals up.  Selling the xbox and TV and other stuff seems painful and harsh but it can be a nice amount to put towards debt reduction.  You spent $29,000 on SOMETHING, might be time to inventorize those assets and liquidate them even at 10c on the dollar to pay down debt and give yourself some breathing room.

I own nothing. I rent an apartment, and I live pretty minimally. The debt came from the business I was trying to build (see my other post) so I didn't just spend the money on nothing. I was trying to build a business.

 

Summer is coming up, are you taking summer school?  If not, put the class time towards more jobs.

I take classes all year long - the sooner I get it done, the sooner I can search for a higher paying job within my company or outside of it.

 

BK just doesn't feel like a solution if after 2 years you are right back up to being burdened with debt again.

This wouldn't happen because I am no longer persuing the business. I let that go so that I could try to manage this debt and figure out how to pay it all. I am not one to shy away from hard work or sacrifice to pay it - unfortunately, sometimes life doesn't give you that option.


Starting Score: TU 607, EX 606, EQ 611
Current Score: TU 675, EX 671, EQ 654 - FAKO scores TU 744, EX 735, EQ 728 - I wish these were my real scores!
Goal Score: 750 across the board. Simulator says 806 if I stay on track for 24 months
Regular Contributor
Posts: 247
Registered: ‎09-10-2013
0

Re: Claiming Bankruptcy - keeping some credit cards

And that's exactly what I'm afraid of - the lawyers. I just feel I have exhausted all of my options at this point and it angers me to be honest. Again, all of my accounts are in good standing, but in doing a budget each month, I honestly have no idea how I have done it for this long when I'm actually paying out @ $400+ per month more than I actually take home. So, it makes me cringe knowing I've kept everything paid and all of that hard work will be for nothing if I do choose the BK route. Smiley Sad  It's just very frustrating to say the least.


Starting Score: TU 607, EX 606, EQ 611
Current Score: TU 675, EX 671, EQ 654 - FAKO scores TU 744, EX 735, EQ 728 - I wish these were my real scores!
Goal Score: 750 across the board. Simulator says 806 if I stay on track for 24 months
Regular Contributor
Posts: 125
Registered: ‎01-11-2017
0

Re: Claiming Bankruptcy - keeping some credit cards

Have you called the creditors to see if you can work out a solution where they close the accounts (so you can't charge any more) but commit to a repayment plan? Slow pays will look a lot better than a BK

Starting Score:Low 500s in 2013
Current Score: TU: 696 EX: 712 EQ: 701
Goal Score: 740 Across the Board
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Regular Contributor
Posts: 247
Registered: ‎09-10-2013
0

Re: Claiming Bankruptcy - keeping some credit cards

I have called about working towards a lower interest rate to allow me to pay things off more quickly. I got one company to do this, but it didn't bring it down very much. I figured any lower amount is better than nothing.

 

My bigger issue is without the credit cards - I can't pay everything else (Cell phone, internet, food, gas) because every dime I bring home goes to paying loans, rent and credit cards. I can't pay the other items at all without using the cards, which of course makes it so I never pay them off since I'm still charging while trying to pay them - that's the dilema.


Starting Score: TU 607, EX 606, EQ 611
Current Score: TU 675, EX 671, EQ 654 - FAKO scores TU 744, EX 735, EQ 728 - I wish these were my real scores!
Goal Score: 750 across the board. Simulator says 806 if I stay on track for 24 months

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