topic Re: Bankruptcy or Debt Settlement Program??? Please Help in Bankruptcy

Bankruptcy or Debt Settlement Program??? Please Help

Anonymous — Fri, 15 Feb 2008 20:01:28 GMT

Hello everyone, I have been reading through these forums for quite some time and I am amazed with the openess of everyones comments. I feel very fortunate to have a collective wealth of knowledge look over this and was hoping to get any insights on my current situation.

To make a long story short, I have managed to bury myself with almost $70,000 in credit card debt. A very unfortunate event occured when I purchased my new home and it has been killing me every since. I did not want to file bankruptcy because I am only 25 and I am planning on getting married within the next few years. I have been able to pay around $1,500 a month towards credit cards consistently which usually cover a little more than the minimum payment. I was doing the math and even with getting interest lower this is going to take me anywhere around 8-10 years to pay this off especially with the planning of a wedding, etc.

So I decided to join a debt settlement program that allows me to pay $1075 a month for 36 months and it will get me out of debt by settlement. I have never been late on anything before but this month I have been advised by the company I decided to work with to stop paying the creditors. Does anyone know if the debt settlement companies send pfd's or are they just trying to settle and get their share? What are somethings that I should expect to happen to my credit in the next 3-5 years? Does anyone have any success stories about settling their debt? I am just trying to sleep good at night knowing that this could work and hopefully make me realize all the "what not to do's" once this is paid in full.

Also, are there any additional steps that I should take in my own hands even if the debt settlement company has negotiated a settlement?

Any help is much appreciated...my first debt settlement payment is going out tomorrow so wish me luck on this next chapter in my life...

Re: Bankruptcy or Debt Settlement Program??? Please Help

Anonymous — Sat, 16 Feb 2008 16:52:48 GMT

I am wishing you much luck, as most people don't make it through these "settlements". I would, just to have all the angles covered, meet with a bk attorney just to see what they think, based on your $70k debt and any other issues you have.

Being only 25, your bk would be over by the time you are 30 (or sooner), the $70k would be discharged and the bk public record on your credit report would be gone by the time you are 35.....

I just filed last year at age 42, not fun to be sure, but I am in a much much better place and much faster by filing a chapter 7 rather than go for any settlement or debt mgmt program.

Others will weigh in here, and I bet that most of them tell you the same - good luck but most do not meet much success.

Re: Bankruptcy or Debt Settlement Program??? Please Help

Anonymous — Sat, 16 Feb 2008 18:17:36 GMT

I am going back and forth trying to decide whether i should file bankruptcy or dmp. I'm trying to seek any info on a dmp if they can give me a rough guestimate on what a dmp payment would be on 70k.

i have read through many threads on bankruptcy on here and chapter 7 sounds like the way i should go since all of my debt is only credit cards but my annual salary is 75k. will i be able to apply for chapter 7?

if i cant and they make me file chapter 13 and i have always been current on my mortgage can they take it from me? I dont want to lose my house.

If i go chapter 13 what kind of monthly payments do you think i would be seeing on 70k?

Im sorry to be asking so many questions, im just really worried here and my friends and family dont seem to be very supportive in trying to help me make a decision.

As always, everyones thoughts and insights on the forums is greatly appreciated.

Re: Bankruptcy or Debt Settlement Program??? Please Help

Anonymous — Sat, 16 Feb 2008 18:59:10 GMT

I read through all of your threads and replies yesterday and thought you had come to the conclusion of DMP. I don't even pretend to understand your situation, but if I remember correctly, you had pretty decent scores. What kind of equity do you have in your home? Can you refi to pay that off? I am not a fan of that anymore but I am also less of a fan of BK. My concern for you as far as BK goes, is what are you going to learn from it? Are you going to go back to credit card dependence? I know people who have filed BK and just go right back to the same habits because they didn't have to work to get out of their situation. Lesson not learned. Same with the refi, me being a perfect example. Not anymore. I think that if you get yourself out of the situation yourself you will learn from this and not fall into the same habits. I wish you luck but you have received more replies to your emails than I have seen for myself and you still don't have enough info in your eyes. I do know you are frustrated but it is time to listen to your inner self and pay attention.

Re: Bankruptcy or Debt Settlement Program??? Please Help

Anonymous — Sat, 16 Feb 2008 19:18:43 GMT

Thank you Danikasmom, yesterday i was trying to make decision whether or not i should go to a debt settlement company and after getting many posts from the wonderful people who took the time to post, i have decided to not go that route.

I just purchased my new home in June and I have already refinanced since then because for some reason the company who did my original mortgage totalle screwed me over and didnt add taxes and insurance and the next month i got hit with a $6,400 summer tax bill (Yes!!! i was livid!!!). My debt did not come from poor management skills, it came from a tragedy that happened right after I bought my house.

The DMP program is what i would prefer to use but i am already currently playing 12k-15k a month and that barely gets me over min monthyl payment and thats also leaves me with very little room for the rest of my expenses. I would assume the DMP is going to be a 5 year plan and if they are expecting anywhere around this same amount of a payment then I know eventually i will just get buried after a year or two and then I would have been kicking myself for not going another route. But doean anyone know what a dmp payment may be for just under 70k? If it is much less than what i am paying monthly to the creditors now that i would go that route.

Thanks again for the words of wisdom danikasmom.

Re: Bankruptcy or Debt Settlement Program??? Please Help

granny031350 — Sat, 16 Feb 2008 20:58:26 GMT

IMO, you should check with a BK attorney as well. they all give free advice for 1st visit. You would probably end up in chapter 13 based on your 75K but if you have family living with you that you support, then that also figures into the equation. There are many factors. I went chapter 13, as posted previously. A chaper 13 is a BK, will be on your credit for 7 years from filing (less than the 10 for chapter 7) and you will make payments to the trustee. The beauty of chapter 13 is that not all your creditors will file a claim (maybe your BOA account) and at the end of your plan (if you finish it completely) that debt is discharged and gone. No creditor contacts while in the plan and no surprises of CA's going after unpaid balances while in a DMP. (not saying that will happen but it could) If you want to make an informed decision, you owe it to yourself to not discount the BK option as well. You should be able to keep your home as long as the lein against it was perfected, your cars, etc Only your unsecured debt would go bye bye.

Message Edited by granny031350 on 02-16-2008 12:58 PM

Re: Bankruptcy or Debt Settlement Program??? Please Help

Anonymous — Sun, 17 Feb 2008 20:13:45 GMT

Granny...thanks so much for being so open with me. I have a few questions if you dont mind answering. I did some research that a chaper 13 still ends up paying the creditors in full? Is that true? Do you mind telling me what your debt was when you filed and what it is you are paying monthly? I guess it would sound hopeful to file ch. 7 if possible. Also, if I have never been late on my mortgage is there a chance that they can take my condo in either 7 or 13?

Re: Bankruptcy or Debt Settlement Program??? Please Help

Anonymous — Sun, 17 Feb 2008 21:10:01 GMT

i started typing out a long reply, but i didn't want to sound off.

research BK online and look for free consultation to see which you qualify for. there is a means test your lawyer has to determine. Chapter 7 which will give you a fresh start before your wedding. mind you, it will stay on your record for 10 years.

it really also has to do with how much you own and make.

don't be afraid to ask around , go to more than 2 lawyers if need be, look out for yourself since everybody else is, especially lawyers. as easy as the process may seem sometime, on some instances, like in your case, it may not be. legal counsel is recommended, doing it by yourself is not.

get yourself a thick skin, look back at what you did wrong, look ahead at what can happen, and move on.

the mandatory classes for BK are very helpful. Give yourself a couple of weeks, if you have that time, to sit back and research what you need to do. gather up your finances, living expenses, assets, and disclose this to your lawyer and he'll determine whether you have the means or not to file.

Re: Bankruptcy or Debt Settlement Program??? Please Help

Anonymous — Sun, 17 Feb 2008 21:14:17 GMT

Thanks so much whois...that is very valuable info. I just recently posted this if it helps...this is my total current situation:

So i have spent the last 3 days contemplating on what decision I have to make. BK is def in the air but I keep hearing that the that the judge has to agree whether or not i go ch. 7 or 13. Here is my current income and expenses.

75k a year is what i make which turns to $3900 a month take home after taxes, ins, and ira.

Mortgage : $2000

Car : $260 (lease)

Condo Association : $140

Car/Home Insurance : $200

Utilities : approx $400

Gas : approx $200

Phone/Internet/Cable : $0 (I work in this industry so its paid for by company)

Food/Entertainment: Approx $400

So this is a total of approx $3600 in monthly expenses that is not including some other misc expenses that probably add up to $100 a month.

I am currently single and I'm planning on getting married in the next 3-4 years. I just bought my new home in June of 07. I am currently taking care of my family as I have two sisters who live with me and my mother and father. I am 25 and my sisters are 22 and 17. My father cannot work and my mother has a part time job because she has to spend time taking care of my father if needed. Luckily, my family lives with me because I am able to pass on some expenses to them. Currently, my 22 yr old sister pays the assocation fee, my mother pays me $600 towards the mortgage and all utilities. The problem here is that my family is planning on moving away in about a year so I cant count on them for long. I dont see the need to try to sell the house especially in this terrible housing market that is currently going on. I have a brand new condo and the builder is still building 70 more condos in my sub so I dont see why someone would want to purchase my home when the builder is selling brand new condos for right around the price I purchased mine.

So anyway...I currently have close to $1000 to put towards my credit cards and I am just under 70k in credit card debt. I only have credit card debt and nothing else. I am current on all of them...I have never been late on a payment with any creditor and I have never been late on my mortgage. At this rate, I am never going to be able to pay off the creditors, it will probably take me well over 10 years with interest and thats not including what could happen after my family leaves. I know i can probably find a roommate but i wont count on that for now.

I also want to know what happens if I file BK now and get married after a few years. What happens to my spouses income? Will that be reported as disposable income? If so, I wont even bother getting married until I get through this...that would be the last thing I would ever want to do to my wife.

Do i seem like a BK candidate? If you genuinely feel with my current situation that there is please let me know. I am thinking about a DMP too but that all depends on what the monthly payment to them would be.

So I hope this clarifies as much as i can in my current situation. If there is anything else you would like to know please dont hesitate to ask. Thank you for all of those who has responded to my most recent posts the last few days.

Re: Bankruptcy or Debt Settlement Program??? Please Help

Anonymous — Sun, 17 Feb 2008 21:39:00 GMT

this is your bk case, if you do file, not your future wife. once discharged, that is it. no one else is affected unless you are part of the credit application.

some of you expenses are conservative even for me, and i make way less than you, lol.

the fact that your mother and sister gives you money to help out increases your take home money.

when you file for BK, not saying you should, but if u are, only your current conditions apply, meaning the fact that your family lives with you is good..that means more hardship for you that is on paper. after the discharge, it doesn't matter what happens to you, you could be a billionaire for all we care, lol.

you need to include food bills and other expenses for your family members who are not contributing. even if it's only to disclose that they are sorta your dependents. thsi will help your case.

from what i can see, if there are members who are sort of depending on you, then the food bills alone should be much higher and separate for entertainment.

don't forget about medical insurance, medicine, expenses for grooming such as haircut, grooming supplies, car maintenance like oil change and repairs, gardening if any, all sorts of insurance, any other taxes you pay, like property taxes averaged out to a monthly figure. you would be surprise how much these things add up and how much you are actually spending a month.....I WAS!

Once you have sat down and knit pick on everything and gathered up everything you spend on, go see yourself a lawyer and he will give you your best option, be it a BK or debt consolidation, which he will also probably set up for you! BE HONEST AND DISCLOSE EVERYTHING TO HIM/HER. If you want a fresh start, you have to be honest with him/her, as well as yourself.

one last thing, filing also means the possibility of losing/liquidating your assets, chapter 13, this might not be the case. go see a lawyer, he'll know more than i do.

be prepared for this option.

Message Edited by whoisjohngalt7 on 02-17-2008 01:38 PM

Message Edited by whoisjohngalt7 on 02-17-2008 01:39 PM

Re: Bankruptcy or Debt Settlement Program??? Please Help

Anonymous — Sun, 17 Feb 2008 21:44:54 GMT

So you mean i can possibly lose my house even though I am current on the mortgage?

Re: Bankruptcy or Debt Settlement Program??? Please Help

Anonymous — Sun, 17 Feb 2008 21:51:21 GMT

chapter 13 is re-organization, granny probably knows more about that.

chapter 7 is a clean slate bankruptcy, which means, if you're combine assets total more than $3000 allowed per rule to be protected from liquidation, then the arbitor will sell them to pay off your creditors, unless of course you plan to re-affirm the debt, in this case, your house mortgage...which i am not too sure you can do with a chapter 7 in terms of a house....i know you can re-affirm a car loan with a chapter 7.

granny, if you read his case, your feedback would be appreciated.

in the meantime, im gonna grab some late lunch, be back later.

Message Edited by whoisjohngalt7 on 02-17-2008 01:51 PM

Re: Bankruptcy or Debt Settlement Program??? Please Help

granny031350 — Sun, 17 Feb 2008 21:53:18 GMT

The house issue has to be dealt with exemptions and equity. Depending on your state, you are allowed certain exemptions. For a house, if your equity is less then no you won't lose your home at all, either chapter 7 or 13. It is great that you are current because with little to no equity, you would keep your house. If you owe on your vehicles, that is the same. There is an allowance for equity in a vehicle. If you are less than that, then you are ok. Ususally if you are making a payment (have a lein) your equity is pretty low and would be under the limit. With your family situation and all the people living in your home, I think you could qualify for a chapter 7 but you really need to talk to an attorney in your area to give you the low down on exactly what chapter you qualify for. No you don't pay off 100 percent of your creditors unless your disposable income says you can. Your payment to the trustee is usually far less than you are paying now.

Re: Bankruptcy or Debt Settlement Program??? Please Help

Anonymous — Sun, 17 Feb 2008 21:54:45 GMT

If it helps the response or not i currently have 0 equity in the house. I just refinanced this month so i can add taxes and insurance to the mortgate note. When i originally purchased the home i got screwed over from countrywide who claims they told me it didnt include taxes and insurance and i got a $6400 summer tax bill the month after i purchased the condo!!! i was livid. That also contributed to the 70k in debt i am

Re: Bankruptcy or Debt Settlement Program??? Please Help

Anonymous — Sun, 17 Feb 2008 22:00:55 GMT

Also, if it helps, here are a list of the creditors i owe and approx balances

Bank of America : $34,000

Amex : $12,000

Discover : $12,000

First USA : $10,000

Household : $1900

Cap one : $500

Totaling roughly 70k

I currently have a 646 EQ

Re: Bankruptcy or Debt Settlement Program??? Please Help

granny031350 — Sun, 17 Feb 2008 22:11:34 GMT

I answered your other post. Your house is safe with no equity. You are discharging ONLY credit card debt. Now a DMP program is 3 to 5 years of monthly payments. You miss and you will be in a big mess. A chapter 13 is 3 to 5 years of monhly payments. Since you are LOSING your parents contributions in a year, I would try to go Chapter7 and have it all be over in 6 months and move on. Your eq score will probably dip to 500's BUT reaffirm your house and the on time payments will be recorded. Make sure the lender will do that (help score) Keep your car payment current (hopefully not with a credit union. LOL they are nasty people in BK) reaffirm that and that will help recover your score quickly. Then you will be reduced to the rebuilder cards out of BK. No more B of A etc (probably never again) but you can get a few cards and rebuild. Within 2 years after BK with on time payments and no new lates, your scores will be back up again. And in 2 years, you can get another home. So with marriage 3/4 years down the road, you should be fine. Just don't hide the BK from your future spouse. She needs to understand your finances, as well as you, hers. GL to you.

Re: Bankruptcy or Debt Settlement Program??? Please Help

Anonymous — Sun, 17 Feb 2008 23:18:21 GMT

I'm already expecting my score to take a huge dump and to be quite honest, at this point my score is the last thing i am thinking about. Reason being is because i already have the house i intend on living in for however long i can.

I guess my hopes are to get ch. 7. im concerned about how much the ch. 13 or dmp payment would come out to be if those would be my options. I dont mind living without credit cards for awhile because they are what got me in this mess to begin with. I would like to know that i have to live with discipline and i know that once i get used to that lifestyle that i will be able to cater to a new lifestlye forever.

Re: Bankruptcy or Debt Settlement Program??? Please Help

Anonymous — Sun, 17 Feb 2008 23:24:18 GMT

i know it sounds scary, the word BK. but sometimes, it is just a word. if everything you told us is right on, then then a lawyer basically is your next step. bring everything you have to him or her and expect an hour at least to talk to him regarding disclosures. nothing is gonna happen if you don't see one.

sometimes, all it takes is a fresh start to get us back to our senses. the required financial classes are really helpful should you decide to file. pay special attention to the financial management class after filing SHOULD "YOU" DECIDE to file.

at this point in your life, scores doesn't really matter now, just getting your life back on track.

with the help of this board, i think my scores are better now than before i file for chapter 7 last year. 648/650/674. but my case might be significantly different than yours, plus i will have many items fall off my report next year. so i keep hoping. but when i was going through BK, the last thing on my mind were scores because the agony of a huge debt weighing me down, all my money going into my debt caused by my stupidity when i was younger, being financially responsible that no one taught me how to be, lol. i wish i knew about all this when i was in my early twenties, lol.

Message Edited by whoisjohngalt7 on 02-17-2008 03:24 PM

Re: Bankruptcy or Debt Settlement Program??? Please Help

Anonymous — Mon, 18 Feb 2008 15:45:45 GMT

LTrain823 wrote:
So you mean i can possibly lose my house even though I am current on the mortgage?

You can reaffirm debts in a BK7, so you keep making the payments, don't be late, you keep living in the house while the bank holds the note. Same with cars and other stuff you wanna keep.

Without knowing your equity, income, assets, etc. it's tough to make a call, but, my inclination is to trust my gut on things like this. I'm not one to recommend BK lightly, but when talking with something about their situation this sinking feeling comes over me. I'm feeling that. It tells me BK is right for you.

Remain current on everything, if at all possible. Do NOT listen to the DMP telling you to default. If you already have a home you're happy in and could stay in for a while, I'd give serious consideration to a BK. I suspect you qualify for a BK13, and probably even for a BK7--unless you inherited a $100K that you dropped into your house as equity, but if so, that might give you some leverage to squeeze down the debt.

If everything is current when you file for BK, then those things you BK won't report as late, in collections, CO, etc. They'll report as IIB.

Re: Bankruptcy or Debt Settlement Program??? Please Help

Anonymous — Mon, 18 Feb 2008 16:16:35 GMT

Noah, thanks so much for the response. I have posted the link to the other thread i posted in this forums that gives a pretty good detailed summary of my situation.

http://ficoforums.myfico.com/fico/board/message?board.id=bankruptcy&thread.id=957