pay off collections or file ch 7?

[Anonymous]

Hi all. Im just wondering if it would be more beneficial to file chapter 7 or pay off collections for the purpose of rebuilding my credit. I cant even get a secured card at this point so Im thinking bk may be my only option. My goal is to purchase my first home in about 4 years so Im ok with the waitign period for an FHA loan which is about 3 years. Any advice is helpful...thanks.

[StartingOver10]

You didn't provide enough information in your post for us to comment effectively.  What is your income and your debt?

[Anonymous]

Im so, I didnt even think abut that. I make about $35k and carry about $10k in debt on my credit report. Theres also my car payment, insurance, day care, food, lights, rent...all the daly expenses. Im barely making it as it is let alone being able to pay on past due accounts. I will say that I have maybe 4 or 5 charge offs that are under $200 that I can pay off. Im just wondering if its worth it.

[StartingOver10]

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@Anonymous wrote:

Im so, I didnt even think abut that. I make about $35k and carry about $10k in debt on my credit report. Theres also my car payment, insurance, day care, food, lights, rent...all the daly expenses. Im barely making it as it is let alone being able to pay on past due accounts. I will say that I have maybe 4 or 5 charge offs that are under $200 that I can pay off. Im just wondering if its worth it.

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First, before you decide to file Bk or not. Explore exactly what you are spending every month.  Write down (or use excel) exactly where every penny has gone over the last 4 months. Break it into catagories like rent, food, eating out (including fast food), utilities, insurance, day care, car payment, car maintenance, gas, cc balances and min due.

Be as detailed as you can.  Next find out which items are actually dischargeable in Bk. Most of what you listed is not.

Then come back here so we can help you - you don't have to post personal details, but enough so we can help you make your own decision.

Sometimes filing Bk is not the answer because you end up discharging very little and you still have an issue. We want help you the best we can.

[Anonymous]

Ok, thanks for your insight. Ive done that but not for four months. Generally speaking, will it increase my Fico if I do pay off charge offs?

[StartingOver10]

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@Anonymous wrote:

Ok, thanks for your insight. Ive done that but not for four months. Generally speaking, will it increase my Fico if I do pay off charge offs?

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Generally no, unless you get a pfd (pay for delete) However rebuilding is two steps:  repair and rebuild. In many cases you have to repair in order to get to the rebuild stage.

[Anonymous]

So the act of paying off the charge offs will help facilitate the rebuilding process as opposed to increasing the score...right?

[StartingOver10]

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@Anonymous wrote:

So the act of paying off the charge offs will help facilitate the rebuilding process as opposed to increasing the score...right?

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Exactly. But before you pay anything at all, look at the DOFD to see if it is near falling off your CR. Come on the board and research the specific creditor. Some are more open to pfd's than others. And, if you have some paid old debt, try a GW letter.

[Anonymous]

Awesome, thanks so much. i really appreciate it and Ill keep you posted.

[StartingOver10]

Great!  The Rebuilding your Credit Forum is awesome. Just visit there and post your question if you don't find it by searching the board.

http://ficoforums.myfico.com/t5/Rebuilding-Your-Credit/bd-p/rebuildingcredit