Is BK7 the right choice for me?

[NWintellectual]

I've been spending a lot of time over in the Rebuilding forum but due to recent events, it looks like BK might be the better option. Forgive me if this post gets a little long winded but I want to give as much info as possible to get the best advice. I have a phone consult scheduled for tomorrow (2/28) with the attorney so any advice (or questions I should ask) before then would be great.

First off, let me list off my baddies and then I will get into the reasons for why I'm thinking this might be the better option:

CHARGE OFFS on CR

• First Premier ($300 CL, $438 bal, DOFD 8/2012)
• First Premier ($275 CL, $486 bal, DOFD 11/2008)
• CreditOne ($200 CL, $640 bal, DOFD 9/2008)
• CapitalOne/HSBC ($300 CL, $0 bal, DOFD 8/2012)
• Salute Visa ($700 CL, $1131 bal, DOFD 10/2008)
• Plains Commerce Bank ($200 CL, $466 bal, DOFD 12/2008)

COLLECTIONS on CR

• AFNI [OC: ATT Mobility] ($580, roll-off 4/2018)
• Avante USA [OC: Green Trust Cash] ($560, roll-off 7/2019)
• Diversified Consultants [OC: Comcast] ($50, roll-off 2/2020)
• Enhanced Recovery [OC: Comcast] ($251, roll-off 8/2018)
• EOS CCA [OC: ATT Mobility] ($273, roll-off 6/2017)
• EOS CCA [OC: ATT Mobility] ($501, roll-off 5/2017)
• LVNV Funding [OC: Credit One Bank] ($1177, roll-off 10/2015)
• Midland [OC: Salute] ($1678, roll-off 10/2015)
• MRS BPO [OC: ATT Mobility] ($580, roll-off 4/2018)
• Portfolio [OC: Cap1/20HSBC] ($1131, roll-off 10/2015)
• Western Control Service [OC: community college] ($248, roll-off 10/2015)

OTHERS on CR:

• Student Loans ($48,000, deferment just ended, repayment due 3/11/2014)
• Santander car loan (paid off 4/2013, several 30/60/90 lates from 2011 onward)
• US Bank Secured Visa ($500 CL, PIF every month, opened 6/2013)
• US Bank Secured Visa ($300 CL, PIF every month, opened 12/2013)
• Fingerhut FreshStart loan (paid off 8/2013)
• Fingerhut Store Account ($200 CL, never used, opened 8/2013)

OTHERS not on CR

• CashNetUSA [installment loan] ($3102, DOFD 8/2012) <- pending litigation in California
• Spotya [payday loan] (~$500, DOFD 8/2012)
• CheckNGo [payday loan] (~$500, DOFD 8/2012)
• Possibly one or two other payday loans circa 2010-2012 (need to do further research)
• Sprint ($131, DOFD 10/2013)

What prompted me to seriously consider Ch7 was the fact that the above referenced account called me yesterday stating they are moving forward with litigation to recover. My income from last year was $50,250, which is just below the $52,996 threshold for King County (Seattle) WA. I'm leaning this direction to (1) stop any garnishment activity and (2) raise my credit score ASAP to enable me to buy a house in early 2017 at a reasonable rate (~1% above prime). My current scores are in my sig.

So what do you all think, is this the best plan for me to get out from under everything, start fresh and move forward or would I be better off trying to settle these old items. I do have some additional funds coming in next month in the form of a bonus which should net me approx $3000.

Let me know if I need to clarify anything or if I left something out. Thanks for all the help you can provide.

[NWintellectual]

Also on a side note, would it be possible for me to keep the two secured cards afterwards since they have been reporting flawlessly during the duration of their existence?

[StartingOver10]

No, you can not keep accounts open during your Ch 7.

If you decide to file BK. You might want to close those secured accounts first, before you file. Make sure the account balances are zero when you close them. You probably want to do so at least 90 days before you file (if not longer).

[NWintellectual]

What if I don't have 90 days? I planned on paying off the balances in full tomorrow and then close the account, but would it be better, given my situation to just burn them and let them offset the balance from the security deposit?

The collector stated that they intend to sue but did not give a timeline so it could be tomorrow, next week or a year from now. I don't want to deal with this anymore and just get things overwith.

[LieslMet]

The lawsuit will be stalled (and stop you from liability on the judgement, if it happens sooner) when you file. You have 90 days... just stop any direct deposit, if you have it going, and get all of your money out of your accounts now, before they win a judgement and can seize it as an asset.

[SoulMaster]

Other than the student loans (not dischargeable), I'm not seeing a huge total debt # here.  Fast adding, about 12K? On 50K income?  In NV, we'd likely get sanctioned (or at least reprimanded) if we filed that case with only one lawsuit pending.  Obviously there might be other circumstances, but based on what you wrote...

I'd strongly discourage you filing BK.  Instead, I'd immediately call the attorney in CA and get a payment plan/settlement that will stop that litigation.  Then, I'd pick-up a copy of total money makeover.  Please read his chapter on "Bankruptcy is for LIFE" even if you don't read any other page in that book.  I wouldn't recommend filing as a "quick" way to rebuild credit/deal with a lot of creditors.  The long-term effects are far worse than we rebuilders sometimes make it seem.

I know that if there was any way I could have avoided the BK, I would have.  I'm sure most of us here would say the same.

$12K in debt will settle for about $4-5K.  If you hire an attorney to handle the DS for you, you'll be out of pocket ~$6-7K and no BK.

BK is faster, but hurts a whole hell of a lot more.

Whatever you do, good luck!

-SM

[StartingOver10]

SoulMaster is 100% correct.

I didn't add up your debt.

No reason to file for $12k.

[NWintellectual]

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@SoulMaster wrote:

Other than the student loans (not dischargeable), I'm not seeing a huge total debt # here.  Fast adding, about 12K? On 50K income?  In NV, we'd likely get sanctioned (or at least reprimanded) if we filed that case with only one lawsuit pending.  Obviously there might be other circumstances, but based on what you wrote...

I'd strongly discourage you filing BK.  Instead, I'd immediately call the attorney in CA and get a payment plan/settlement that will stop that litigation.  Then, I'd pick-up a copy of total money makeover.  Please read his chapter on "Bankruptcy is for LIFE" even if you don't read any other page in that book.  I wouldn't recommend filing as a "quick" way to rebuild credit/deal with a lot of creditors.  The long-term effects are far worse than we rebuilders sometimes make it seem.

I know that if there was any way I could have avoided the BK, I would have.  I'm sure most of us here would say the same.

$12K in debt will settle for about $4-5K.  If you hire an attorney to handle the DS for you, you'll be out of pocket ~$6-7K and no BK.

BK is faster, but hurts a whole hell of a lot more.

Whatever you do, good luck!

-SM

---

Thank you SM so much for replying to my thread. Maybe I am overreacting a little much to the news of pending litigation but my mission is to improve my credit score as quickly as possible so I can buy a home in 2017. My feelings leading me to consider BK were the fact that with all the derogatory marks on my credit already what more harm could be done. I've really tried to manage my money much more wisely over the last year but every time it seems I might be getting ahead a ghost of Christmas past rears its head to knock me back down again.

I know that since most of my debts are charged off or in collection, even paying them off will not budge my score and I'm worried I'll be stuck in the 500s for the next 3 years. I calculated that with my student loans being paid on time and a responsible rebuild I can be into the 700 club in 18 to 24 months. Most of these creditors, as I have learned from the rebuilding forum, are usually not amenable to deleting paid collection accounts.

I just got a copy of the Dave Ramsey book thru Amazon Kindle and flipped through to the page you mentioned and understand where you are coming from, especially after reading the thread you posted on going from Ch7 to 700 in two years. And I'm thinking you might be right here. If I go through with BK7, I'll only be treating the symptoms not the disease - the sickness of poor money management. Resorting to the "nuclear option" to clean up this mess without addressing the underlying cause isn't going to get me that mortgage I dream for.

You have definitely given me a LOT to consider and research before my phone call with the lawyer tomorrow. Thank you.

[SoulMaster]

Good luck.

You do have a $3K bonus coming in.  That would pretty much kill that lawsuit before it ever makes it to court.  The rest is easy.

Lets say you can knock off $500 in settlement payments every month.  That'd take you out of debt in less than a year.  I absolutely guarantee that with the right rebuild plan you'll be better off (when it's time to buy the house) by settling everything by Jan 2015 and rebuilding for 2 years than having a BK and rebuilding for 2.5.

Glad your reconsidering.  Another thing to consider is that if you go to a Bankruptcy Firm as opposed to a Full Service Debt Relief Law Firm, the attorny has only one thing to sell you: Bankruptcy.  S/he's going to make it sound like roses.  I can't stand bankruptcy mills.

Again, best of luck,

-SM

[NWintellectual]

Thank you for your reply. I called the agency handling the issue and they agreed to a payment plan to forestall things any further. They agreed to knock the total down to about 2000, I paid 200 today and 100 per month until done. I will probably settle this one outright down the road, but for now this works (since they are not reporting to any of the credit bureaus). Disaster averted!

I also spoke to the attorney (full-service debt firm) and he also highly advised against declaring, instead saving it for a "catastrophic emergency". He did offer to help me with settling some of these other items and dealing with any potential FCRA violations or other issues. To be honest I am seriously considering the offer.

After having time to mull (and sleep) it over I feel much better about my choice not to invoke the "nuclear option". Thank you so much, again, for taking the time to review my thread and proffer your advice.