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My husband & I have a lot of debt. He had a business that we financed on credit cards, refinanced mortgage several times to purchase equipment for business and eventually sold business at a huge loss. He suggests we file BK. I'm am afraid of the long term effects. We would like to move to a better neighborhood in the future. My salary is decent & he is in school and hopefully will be make a decent salary when finished but over the last few years his income has dropped & our debt risen. Currently we are late on mortgage & car lease, which is up in a few more months. Other car is paid off. Mtg is in his name only as is car lease. dont know his score but assume it is really low. Mine dropped 67 pts today as a creidt card posted 30 days late. first time in many years. My Equifax is 557, with $30,894 revolving debt & $77,238 installment loans, of which about $70k is student loans. I would estimate our total revolving to be about $72k. We have no savings, except for $2000 in a 529 for our son. Our mtg is more than likely upside down to our house value by at least $50-$75k. At my current income and his income, we cannot pay all our credit, never mind pay it down. My son enters public school in fall & end of lease does give us slight more money at the end of the month.
My questions are : 1) how damaging will a BK to moving in a few years? 2) will BK require repayment of debt? 3) if repayment is required, would credit counseling be better?
Mine is below that already.
Found out last night, my neighbor talked to a realtor and ther is no hope of selling anything in our neighborhood for awile. So maybe this would be a good time to do BK while we ride out the market? I just wonder now that credit is stricker with the recent bad lending, will BK look worse in the future to getting a mortgage. Obviously now one can tell. Anyone out there now that is coming out of BK and apply for a mortgage now?
Keep in mind that your 70K in student loans is NOT dischargeable in a BK. That being said, it doesn't sound like you have much (30K?) in unsecured debt. Probably your best benefit is to get a mortgage modification within a Bankruptcy. I'm not real familiar with the new laws in that regard, but I suggest you get a few free consults with some BK Attorney's to discuss your options.
While you mention wanting to move to a better neighborhood down the road, keep in mind that you need to take care of business first. If you don't do something about your current situation, "down the road" will be farther than you think. Sometimes it's tough to come to the realization that BK may be a necessary option. Trust me though, you are definitely not alone.
It may not seem so now, but there is a huge sense of relief after you take charge of your finances, and face the music, if you will. Right now, it sounds like money is controlling you. Both you and your DH will feel better when you are controlling it.
A Chapter 13 requires repayment of debts. Not necessarily 100% of those debts though. A Chapter 13 is based upon your disposable monthly income.
IMO, debt consolidation is generally useless. Many try to go that route, only to prolong the inevitable. Debt counseling, or debt consolidation companies promise to "work with your lenders" to reduce your payments and or interest. They can promise all they want, but ultimately, your creditors have to approve. If they refuse, all bets are off. With a Chapter 13 (or 7) the BK Court ORDERS your creditors to comply. Whether they want to or not.
Only an attorney can advise which Chapter (7 or 13) would best suit your situation. Keep in mind that if you want to go 7, you need to be current on your home to keep it. If you file 13, you can catch up your arrears during the length of your plan. In addition, if you are contemplating a 13, you will probably have no problem keeping your leased vehicle. The problem, however, is that when your lease expires, you are going to be in a really tough spot regarding replacing that vehicle. If you think you will be filing, preplanning is key. It may mean buying another vehicle (a good reliable dependable vehicle) prior to filing, so you don't wind up stuck without the vehicle.
There is way too much to go into in this post. So many options, and BK is definitely not a a once size fits all, if you know what I mean.
I suggest you go for some consults. Find an attorney who is not only knowlegeable, but that you feel very very comfortable with.
With regards to your message title "How bad will BK be?". Please remember. You and your husband are MORE than just a credit score. Yes, we are all here because we care about what our scores are. That being said, like I said, first things first. Take care of your financial house, and worry about rebuilding later on. It can be done, it just takes some time. When faced with a situation where you are just trying to stay afloat, the LAST thing you should be worrying about is your credit score. Again - that can be handled later. Believe it or not, some folks scores are SO low by the time they file, that their scores actually improve after a BK. The reason being, the debt is discharged, and you are no longer obligated to pay it.
I wish you all the best!
K
Oh.........say it isn't so....... UGH! Debt settlement companies!!!!!!!!!!!
Um, just so you know.......these don't exactly look nice on your credit report either, but I digress.
An attorney may be able to give you a ballpark figure, but its really a complex formula based on what your monthly disposable income is. I believe if you google, you can find the forms on line where you could input all the info and get a rough calculation.
Not sure if PMing is allowed on this board. I'm kind of new here.
If possible, I'll PM you with a GREAT link to a BK forum. The people there are AWESOME, and you will learn SOOOOOOOOOO much there.
Hang in there. This too shall pass!!!!!!!!!!!!
K