Need help understanding BK

[Anonymous]

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@Anonymous wrote:

Bk13 is a structured payment plan.  You can do that without BK...

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No, you can't, necessarily -- primarily because interest on the unsecured debt keeps accumlating at inflated rates (the cc companies are merciless -- once you show even the least bit of vulnerability, all of them WILL hit you with high-risk rates. I know, I've been there. I filed Chapter 13 BK before I had even a single late, after almost a year paying through a consumer credit counseling service (which DID manage to reduce my rates, but not my payments). Bankruptcy STOPS debt (including interest) accumulation, period. But, there is light at the end of the tunnel: with no lates and a handful of PIFs not BK'd (my BK'd unsecure creditors got 80%) -- and a payment plan which actually allowed me to save almost a third of my income -- my FICO scores were good enough that I closed a mortgage just 55 days after discharge, otherwise debt-free. Even under the credit counseling service, I'd still be paying off debt for several more years.

Message Edited by oldhack62 on 06-01-2009 07:46 AM

[krielly]

Agreed! BK forces creditors to accept your payment terms. It also stops interest and late payment fees on unsecured debt!

With credit counseling/management type services, your creditors must agree to whatever is negotiated before your plan will work. In the meantime, I hear horror stories all the time about late fees and late payments being reported all through the plan. So.....at the end, your credit may be destoyed anyhow.....even without a BK on your report.

It really is a case by case decision as to whether or not someone should file. There is no blanket statement that applies to everyone..........

K

[Anonymous]

lee307 :
 
I'm not going to bother reading through the rest of these replies , but I will respond to your actual questions.
 
#1 you make 100k a year, the problem is once you do the means test that others spoke about your plan will be paying unsecured creditors most likely a high percentage. I would guess around 30% or so.
 
#2 the student loans will not be affected by the bankruptcy outside of the automatic stay, They cannot collect against you, put a lien if there isn’t already one on your credit for those items, most importantly the interest stops and very little if any of your plan payment at the very end will go towards it, thus you will be paying it once again after discharge from the bankruptcy.
 
#3 if you owe any taxes , you will be required to pay 100% secured priority towards the IRS/State Taxes, their penalty and or interest is considered unsecured so you will save some money there.
 
Important to note about taxes and bankruptcy, it is VERY important that you NEVER owe money at the end of the tax year, you have to supply the tax returns to the court, and the solvency unit at the IRS does look at these, what this means to you is if you are seen not having enough income withheld from your paychecks they will take over and make your employer switch withholding to zero thus taking the maximum amount from your paychecks outside of using additional withholding option + the zero withholding.
 
#4 Credit Cards. This is where you will save a lot of money simply by the inability of the credit card companies to charge you interest , this obviously applies mostly to your defaulted APR rate on the 20 thousand dollar balance. My thoughts are this particular debt will be unsecured and paid at the plans unsecured amount, which sucks for you guys that you make the money you do because you will be paying quite a bit towards unsecured as stated above.
 
I would guess your credit scores will go down into the 550-600 range once the case is filed and creditors listed start putting the debts in a wage earner plan.
 
Regardless of your worries the bankruptcy is a public record, I have never personally heard of any employer looking down on someone for this, in these current times I’m sure a lot of others there are doing the same thing.
 
That is the last of your worries and even if they knew, I wouldn't let it bother you.
 
If you have any actual questions regarding the bankruptcy itself I can answer any direct question you have.
 
BTW: the great part about a chapter 13 is, after 36 months you have the option to pay it off and get the discharge and start moving on with your life, likely your payment will be quite large.

[krielly]

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BTW: the great part about a chapter 13 is, after 36 months you have the option to pay it off and get the discharge and start moving on with your life, likely your payment will be quite large.

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Just have to comment/clarify your last statement above. This is no longer true with the BK Reform laws. If you are required to pay for a 60 mos term (with the OPs income, they will be), there is no more early payoff after 36 mos at the determined percentage. You must pay the full term of the BK unless you are able to pay back 100% of the claimed debt.

K

[krielly]

Um.......... I'm pretty sure that's exactly what I just said.........

[Anonymous]

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@krielly wrote:
Um.......... I'm pretty sure that's exactly what I just said.........

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Sorry,

I was doing something else and didn't read your comment.

I removed it. You were/are correct.

[krielly]

No worries!

[Anonymous]

My father in law went through BK twice in the last 20 years.  He never learned his lesson.  Neither will you: Proof?  "Obviously we need to keep both vehicles and our house."

"I am worried filing BK can get back to my employer and cause problems."

 - Depends on the employer, and how often they run credit and/or background checks (if at all). Usually, it's a first hire check, after that you should be free and clear.  If you dont plan to leave your job, you'll most likely be fine.  Again, depends on the job.

"Third, am I missing another option to get out of trouble?"

- Sell the house, rent something, or buy much smaller.

- Sell the cars, and buy a 10 year old $2k Honda or whatever... yes, it's older. yes, it'll cost less to insure. yes it will require maintenance. 

- Seriously cut the expenses, and get out of the "I want this now" habit.  This is the toughest part.

If you cannot pay off your debts like this, then BK wont help you.  You'll just do it all over again.  Think about it... 82k in debt.  Did anyone stop and question the debt when it was 10k?  Unlikely.

[Anonymous]

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@Anonymous wrote:

My father in law went through BK twice in the last 20 years.  He never learned his lesson.  Neither will you...If you cannot pay off your debts like this, then BK wont help you.  You'll just do it all over again...

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Thanks for that. We all need a cheerleader!

[krielly]

Right? I was going to respond too, but I was counting to 10 first........... UGH!!!!!!!