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Single Mother who has no clue what to do....Debt Management Company or file for Chp 13???

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Anonymous
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Single Mother who has no clue what to do....Debt Management Company or file for Chp 13???

Hello everyone:

 

I desperately need some advice. I'm a single mother of a wonderful and healthy 18mth old.  I get no child support from the father.  I have a good job, but recently had to take a $1800/mth net pay cut in order to keep my job and more importantly my benefits (I'm an 2.5 yr Ovarian Cancer survivor and benefits are very important to me). 

 

Here is my situation....I am way over my head in debt, mostly credit card debt (all in my name) that we used for my ex's business that is now bust (my ex filed for bankruptcy and doesn't have a job).  I now make $73k/yr (used to make $103k/yr plus bonus).  I rent out my house and live with a relative for low rent. The rent revenue only covers the 1st mortgage.  I looked into selling my house, but my mortgage is now more than what it is worth ($35-40k over, according to my real estate agent).  My credit scores are 680, 676 and 687 with no adverse history - never a late payment - I'm just maxed out.  I can't make ends meet anymore, I've used up all my cc and I've exhausted my savings.  I've sold most of my belongings.  I'm lost and stressed beyond belief.  Here is a breakdown of my debt:

 

- 3 Citibank cc (27k, 20k and 7k)

- $10k BofA loan

- $14k Discover card

- $20k personal loan

- $240k first mortgage

- $60k second mortgage.

 

I had a "free" quick appt with a bankruptcy lawyer and the paralegal told me she didn't think I qualified for a Chp 7 because I make too much money.  So it looks like I would have to file for Chp 13. 

 

Here is my question...from my understanding, if I file for Chp 13 I would have to pay back all my debt, but the courts would determine the payout amounts and manage my income.  Someone told me I would be better off contacting a debt management company and trying to settle the debt that way.  He said this would reflect better on my credit.  Is this true?

 

If you were in my shoes, what would you do?  I'm not looking for the easy way out, I take responsability for my debt and how I got to this point, I just want to make sure I am doing the smart thing for me and my daughter.

 

Thank you all for your response!!

 

PS: In addition, I just got a letter from Citibank letting me know they are increasing my 3 cc's interest rates to 18.99% effective 01/05/10.

                   
Message Edited by LilPenguin1 on 11-24-2009 12:19 PM
Message Edited by LilPenguin1 on 11-24-2009 12:20 PM
Message Edited by LilPenguin1 on 11-24-2009 12:39 PM
Message 1 of 5
4 REPLIES 4
QueenBean
Regular Contributor

Re: Single Mother who has no clue what to do....Debt Management Company or file for Chp 13???

I'm not a fan of debt management companies - it's nothing you can't do yourself.

 

Others here have been through situations similar to what you are facing - you aren't alone.

 

Questions: 

 

Were the CC used exclusively for your Ex's business?  I'm wondering if you can file a claim against his bankruptcy?

 

Do you live in a non-recourse mortgage state?  If so you may be able to just walk away from the mortgages.

 

 

 

 


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Message 2 of 5
Anonymous
Not applicable

Re: Single Mother who has no clue what to do....Debt Management Company or file for Chp 13???

Chapter 13 has a maximum of 60 months payment plan.  And the payments are based upon your income and discretionary income.  The payment plan will provide you a manageable pay structure for the 36 to 60 months.  All debts are then discharged at the end of the payment plan.  Therefore your creditors generally get a percentage of the debt.

 

So you are not correct that you have to pay all of your debts at 100%....unless your income can handle it.

 

If you file, you can get out from under the house and credit card debt, subject to a 5 year pay plan.  Since your home is upside down and you could only short sell, and the bank won't short sale unless you default, you may consider the BK13.  You get one easy payment that is within your means and at the end any remaining debt will be gone and you have a new lease on life.

 

CH13 only stays on  your credit report for 7 years.

 

IMO  Smiley Happy

 

 

Message 3 of 5
Anonymous
Not applicable

Re: Single Mother who has no clue what to do....Debt Management Company or file for Chp 13???

I understand it is income driven or "disposable income" But typically how much does ch. 13 reduce the unsecureds by?

For example if unsecureds were 40k? So if a filer only has $300 a month to spare does that mean the creditor will only receive $300 x (36 or 60 months)?

Message 4 of 5
Anonymous
Not applicable

Re: Single Mother who has no clue what to do....Debt Management Company or file for Chp 13???

The payments are not based upon the debt amount, but on your income.  Therefore, whether $40k or $400k the payments would be the same.

 

 

Message 5 of 5
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