Help... Thinking of filing bankruptcy.

[Anonymous]

Hello Everyone!

I am 27 yrs old and have made some absoute horrible financial decisions while younger. My situation right now - My income is roughly 110k per year (but I live in SF BAY so rent is extremey high).

I am currently  roughly 35k in debt not including student loans. 

Most of this 35k is in secured debt. Such as fruniture $7000 (originally $2700) , electronics $4000 (originally $2400), medical $1300, MISC $9500 

All of those accounts have went bad on my CC report. 

Currently my credit cards and car loan are all up to date with no missed payments. 

I just can't seem to get on track with taking care of all those above items. I've called the collections agencys and creditors to try and settle they all pretty much laugh and say no. 

Is this a senerio in which bankruptcy would help - I know the amounts are probably considered minor when placed against my income but im truly frustrated with the whole thing. My scored is being dragged down because of those and its beyond frustrating .

[Anonymous]

only do a chap 13 bk if you cannot reduce your own debt. have you considered changing your car, moving to a lower cost home, freezing your credit cards so there is no more interest accrued and you can actually pay it down? the court may look at your situation and drastically change your lifestyle.

[Anonymous]

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@Anonymous wrote:

only do a chap 13 bk if you cannot reduce your own debt. have you considered changing your car, moving to a lower cost home, freezing your credit cards so there is no more interest accrued and you can actually pay it down? the court may look at your situation and drastically change your lifestyle.

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Unfortantely, changing my car really isn't an option payments are pretty low and im just maybe 1.5 yrs from paying it off. - Credit Card debt currently is  $3200 (spread over 6 cards) 

in a Ch. 13 how badly does it affect your score? Are payments still reported late? Is it possible to rebuild credit during a ch 13?

[Anonymous]

any bk is bad.  my score took a 240 point hit just for filing (mine was dismissed-the worst possible thing that could happen, its a long story). bk plans are for 3 yrs at a minimum your payment history is reflected paid as agreed within 90 days of your plan being approved by the trustee.  you can rebuild during your plan but any unsecured debt has to be approved through the trustee...i'm not sure about secured cards/debts because i didn't go that route.

[Anonymous]

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@Anonymous wrote:

any bk is bad.  my score took a 240 point hit just for filing (mine was dismissed-the worst possible thing that could happen, its a long story). bk plans are for 3 yrs at a minimum your payment history is reflected paid as agreed within 90 days of your plan being approved by the trustee.  you can rebuild during your plan but any unsecured debt has to be approved through the trustee...i'm not sure about secured cards/debts because i didn't go that route.

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So, during the BK - all  unsecured credit must have trustees approval? So after you BK was dismissed how did you go about cleaning up your credit / rebuilding?

[Anonymous]

While in a Chapter 13 bankruptcy, you must obtain trustee approval before obtaining new credit. The idea here is that your Chapter 13 plan should leave you with enough money to pay for your budgeted expenses -- obtaining additional credit may be a problem, as there shouldn't be money left over to pay for a new loan (otherwise it would have gone to your creditors).

Don't rule out Chapter 7. While you are above the median income, you do live in a high-cost area and you may still pass the means test (that would allow you to proceed with a Chapter 7). A competent bankruptcy attorney can assist with this -- and should be able to tell you how far off you are. There's also a good site out there that will let you do a "mock" means test.

Do you currently have a budget? If not, you should make one and determine what disposable income you have (a different calculation than the means test). Have you worked with a credit counseling agency? Even in a high-cost area, it seems like there should be options to pay down your $35k debt. A Debt Management Plan through a credit counseling agency would create payments of about $700 over 5 years. 

If we had a better understanding of what your expenses are -- and why you're unable to pay your creditors -- it may help get you better advice about bankruptcy.

As far as cleaning up credit/rebuilding after bankruptcy, check out the "HOW TO: From BK7 discharge to 700 in 24 months or less!" thread. 

[audio-disabled]

To put it bluntly, with your earning at 110k a year with a debt of 35k, not including student loans. Bankruptcy shouldn't be an option at all.

But it could help if you could list your monthly expenses for us to see and understand better where this is going, whether bankruptcy really is an option or not.

I filed Chapter 7 bankruptcy with 30k/year from one full time job and a side job with earning ranging roughly 400-1200 a month. My total debt was 55k and all included in Ch7 bk. After all monthly payment, I wasn't able to put food on my table, no gas money, and I have a dog.

Collection agency, in my opinion, likes to play hardball and wants their money now. You need to play hardball with them and tell them you won't pay until they meet you half way or make agreements. What I would do is offer to pay in full and have the derogatory mark removed from your credit report, that's pay for delete. Get that agreement in writings before you pay. Refusing to pay won't make your situation any worse, you're already in bad situation, unless they decide to sue you. Start rebuilding now.

Do you have any major financial plans in the near future?

[Anonymous]

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@Anonymous wrote:

While in a Chapter 13 bankruptcy, you must obtain trustee approval before obtaining new credit. The idea here is that your Chapter 13 plan should leave you with enough money to pay for your budgeted expenses -- obtaining additional credit may be a problem, as there shouldn't be money left over to pay for a new loan (otherwise it would have gone to your creditors).

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From my understanding this can differ by region and trustee.  Some trustees will allow you to obtain more credit but there is a threshold to what they will allow.  They would need to talk to the trustee and the BK attorney to figure all of this out.

[Anonymous]

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@Anonymous wrote:

Hello Everyone!

I am 27 yrs old and have made some absoute horrible financial decisions while younger. My situation right now - My income is roughly 110k per year (but I live in SF BAY so rent is extremey high).

I am currently  roughly 35k in debt not including student loans. 

Most of this 35k is in secured debt. Such as fruniture $7000 (originally $2700) , electronics $4000 (originally $2400), medical $1300, MISC $9500 

All of those accounts have went bad on my CC report. 

Currently my credit cards and car loan are all up to date with no missed payments. 

I just can't seem to get on track with taking care of all those above items. I've called the collections agencys and creditors to try and settle they all pretty much laugh and say no. 

Is this a senerio in which bankruptcy would help - I know the amounts are probably considered minor when placed against my income but im truly frustrated with the whole thing. My scored is being dragged down because of those and its beyond frustrating .

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With what you make and how much debt you have, you should be able to get back on track (I won't lie, it won't be easy).

I would suggest starting a budget and run it for a few months to see where your money is going.  I did that and it really helped.  At the time I was using YNAB.

I found a lot of places that I could save money.  I was spending a lot of money on frivolous things.

A Chapter 13 will hurt your score but I feel it's treated differently than a Chapter 7.  I was able to start rebuilding while in the Chapter 13 but this all depends on the trustee and how your Chapter 13 is setup.

[arizonahd]

35k is a lot of debt but it's manageable. You are better off creating a debt payoff plan and stick to it. BK is a serious thing to do, you really want to save this as an absolute last resort. I actually have filing BK as part of my economic strategy; (Mod Cut-Not here please) Even if you decide to go ahead and file, discharge the debt, etc. you will have the same money issues as before except now without the option of BK protection. 

My recommendation would be to start throwing money at your high interest credit cards and getting those paid off. Keep making the minimum car payments, that is actually helping as an active TL. Look at anyway to save extra money to keep throwing at the cards. You will actually start having fun doing this, it's a challenge and every dollar you pay off is an inch towards freedom. 

In addition, if your cards carry a similar interest rate on all of them, try to focus on one to get it under 50% and then on to the next. The goal here is to get your score to an area where you might qualify for a card with 0% promo balance transfers (such a chase slate) that you can transfer balances on to. If you do go that route, keep throwing money at the cards. Honestly though, if I was in your situation, I would either find a lower cost place to live, bunk with someone, etc or just move altogether before considering BK.