Still confused how chapter 7 hurts you when I see people getting new credit

[enharu]

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@danny4l wrote:

Can you just give a general idea when to go the DMP route or BK?

I had 30000 in unsecured debt and I could easily afford that even working part time.  That is why I chose the DMP.

Do you need to have six figure debt to choose BK?

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it honestly depends on the individual.

For someone who makes say 1.1k a month now because he lost his previous job and has to settle for something less. However, he owes 30k in unsecured debt at 20% APR rate. After paying taxes and making those payments, he is pretty much going to be left with nothing. This is hypothetical of course.

And not all debt has a payment arrangement set up where you can pay over time. What if you have a 30k medical bill that is due right away. Maybe you can set up DMP or some kind of payment arrangement. But what if the medical bill is now 300k instead? Some people do not even make 300k in 5-10 years. And even if they tried paying this down it's going to take longer than financing a mortage.

Basically whenever the debt owed is outrageously high compared to income + assets, it is a wiser choice to choose BK instead because possibility of repayment is slim to none, or that repayment is going to take ages to fulfill.

[danny4l]

The scary part about all of this is that I was once told to declare bankruptcy and I almost considered it because I had no idea what my options were.  After I did a little research and some help from a family member, we decided on the DMP and I am able to make these payments.  Don't get me wrong. It is hard to write a $600 check each month and watch your money disappear but I guess 3.5 years in a DMP is better than 10 years in a BK.

Another thing about my situation is that I had no assets.  I'm a student and I live at home.

[chubbs3]

I'm filing for BK7 (either today or tomorrow) with about 40K in debt. I currently earn about half of what I did just two years ago and have no disposable income whatsoever. Hence the BK7. A repayment plan wouldn't make sense because I wouldn't be able to repay it. Pissing in the ocean.

I have no interest in getting credit for any other reason than to build credit.

6 months from now I may pop on here and crow about refinancing my 24% auto loan or jumping from a secured card to an unsecured card but make no mistake, it's not all bj's and icecream on this side of the fence. For me, the allure of chapter 7 is the finality of the discharge. I wouldn't want to work 2 more years, four more years, six more years, whatever it happens to be, just to payoff predatory, subprime lenders that I despise with every fiber of my being. 

[guiness56]

You have to qualify for a BK 7.  It isn't based on debt alone.  Your income has to be below the median for your state.

[DaBears]

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@guiness56 wrote:

You have to qualify for a BK 7.  It isn't based on debt alone.  Your income has to be below the median for your state.

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+1

[sgtm7]

I used a debt management program many years ago.  The problem I had, was that unlike a bankruptcy filing, the companies do NOT have to agree to go along witht he program.   I used Consumer Credit Counseling Service at the local YWCA.  I had some creditors who refused to agree to stopping the interest rates.  Had a few that refused to agree to lower payments.   The problem was that CCCS failed to let me know that those companies would not go along with the lower payments.  So even though they reported I was paying through CCCS, they still reported to the credit bureaus that I was late.   So I would advise that you check all of your bills to make sure that they are how you think should be, and that you check your credit report regularly.  

In the end, I ended up filing a Chapter 13 bankruptcy in 2005, and was bill free by 2009.   Today may credit scores are just below 800.   The bankruptcy worked best for me, but everyone's circumstances are different.  My problem was not making sure the company I was using was competent in managing the accounts and keeping it's clients informed. 

[rckstrscott]

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@sgtm7 wrote:

I used a debt management program many years ago.  The problem I had, was that unlike a bankruptcy filing, the companies do NOT have to agree to go along witht he program.   I used Consumer Credit Counseling Service at the local YWCA.  I had some creditors who refused to agree to stopping the interest rates.  Had a few that refused to agree to lower payments.   The problem was that CCCS failed to let me know that those companies would not go along with the lower payments.  So even though they reported I was paying through CCCS, they still reported to the credit bureaus that I was late.   So I would advise that you check all of your bills to make sure that they are how you think should be, and that you check your credit report regularly.  

In the end, I ended up filing a Chapter 13 bankruptcy in 2005, and was bill free by 2009.   Today may credit scores are just below 800.   The bankruptcy worked best for me, but everyone's circumstances are different.  My problem was not making sure the company I was using was competent in managing the accounts and keeping it's clients informed. 

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I will say it is a different world now than it was when you did a DMP --

Banks have lost so much in defaulted debt in the last 5 years, that almost every single card and bank will now look at the DMP option of repayment as beneficial to them, where as before they often looked down at the potential interest lost

-scott

[sgtm7]

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@rckstrscott wrote:

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I will say it is a different world now than it was when you did a DMP --

Banks have lost so much in defaulted debt in the last 5 years, that almost every single card and bank will now look at the DMP option of repayment as beneficial to them, where as before they often looked down at the potential interest lost

-scott

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You are probably right.  In fact, when I filed Chapter 13, I wasn't behind on any bills and had credit scores in the 700s.  I was just using every dollar I earned on paying debt, and decided to file before the bankruptcy rules changed that year.    At the time, I could have even filed a Chapter 7, because they hadn't made the qualifications as stringent as they are now.  

[c1fair]

My Brother-in-law did the debt repayment plan and was able to re-establish credit and purchase a home through a First Time Homebuyer Program. He was able to do so, because, before CR outsourcing began, delinquent payments were only legally reported for 2 years. Bankruptcy can limit your options for up to 10 years, while you wait to re-establish credit. If you can pay, please do. In the mean time lobby your US representatives, in order to, re-establish US law in credit reporting. Fair Credit reporting was always 2 years for payment history and 1 year for credit inquiries, before the CR Bureaus began the illegal migration to foreign outsourcing jurisdictions.

[guiness56]

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@c1fair wrote:
My Brother-in-law did the debt repayment plan and was able to re-establish credit and purchase a home through a First Time Homebuyer Program. He was able to do so, because, before CR outsourcing began, delinquent payments were only legally reported for 2 years. Bankruptcy can limit your options for up to 10 years, while you wait to re-establish credit. If you can pay, please do. In the mean time lobby your US representatives, in order to, re-establish US law in credit reporting. Fair Credit reporting was always 2 years for payment history and 1 year for credit inquiries, before the CR Bureaus began the illegal migration to foreign outsourcing jurisdictions.

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Can you state your sources?  I have never heard this one before.

Why is this illegal?  Lots of companies outsource.