Hi all, hoping I can chime in some good advice on the bankruptcy/debt settlement debate. A little about myself... I filed for Chapter 7 bankruptcy in 1998... a recent college grad with a weakness for shopping... racked up a large debt that I couldn't pay for(especially since I couldn't find a job for months after graduation). During the years after I filed Ch7, I still managed to get credit cards and a car note (my interest rate is 5.74%.. can't beat that on a new car especially with a bankruptcy item on my credit report). Unfortunately, I managed to rack up another bit of credit card debt when I moved into my first place in 2006 (furnishings, paint, decorations, the works). I did not want to file a second bankruptcy (this would truly show that I am undeserving of any form of credit), so bankruptcy was not an option for me again. My current salary is about $85000, but I found myself drowning and truly unable to manage my debts... actually it's 3 credit cards (balances totalling $15000) that I charged beyond belief. At first I looked into the debt SETTLEMENT option... but, when they told me that I had to NOT pay my credit cards for a few months, ignore the phone calls and then THEY (the settlement company) would intervene after 6 months didn't sit too well with me. And the thing with these SETTLEMENT companys is that I had to keep making a payment to them as opposed to the actual credit card company; pretty much sounded more like a scam than a benefit. Next, I looked into a debt MANAGEMENT program (DMP). This option is MUCH better. The agency I am currently with works with the creditors to lower the minimum payments, lower the interest rates, eliminate late payment fees, etc. I just checked my credit report today and I don't see the DMP on my reports. The cards are listed as current, which is a positive!!! I find this option much more manageable than me trying to beg the actual credit card company to work with me. I've been in my DMP since 10/2008, and I pay about $400/month. I truly see the credit card balances going down, the interest rate is 9.9% compared to the astronomical 29.99% that I was originally dealing with. I plan on doubling up on the payments once I clear off my other issues. Additionally, I don't have that NEGATIVE item on my credit reports. Lastly, I got a second job, and I use that extra money to further tackle my smaller credit card debts. My ultimate plan is to be in much less debt by the summer of 2008. My overall goal is to get my house by summer 2009 so I have to do my best to eliminate the debts and build my assets!!! LTRAIN, here's my advice, BANKRUPTCY is an easy way out. Even though I did it, I truly regret it. I should have been more responsible with my credit cards when I was younger. My bankruptcy should finally clear off my credit reports by the end of '08/beginning of '09 (THANK GOD!!!). In all honesty, bankruptcy HURTS you... for 10 years your FICO score will SUFFER!!! Yes, you'll still get credit card offers, etc. But let's say you wanna move from that condo to a house, or you wanna refinance... the interest rate you may receive may cause you to pay MUCH MUCH more money in the end. In the long run, would it have been beneficial? Don't think "well, I'm young and I can wait the 10 years." That's ignorant!!! The 10 years ARE LONG and saddening!!! Especially when you want to do so much and you can't!!! Take it from someone who was young when she did her bankruptcy!!! The DMP is an option that has been quite more beneficial, for me anyways. This option shows that you ACKNOWLEDGE your debts, but that you're WILLING to PAY!!!... which in turn looks 10x better than copping out of making a single payment at all. The only down side is that you won't be able to use those cards again, but then again who needs them? Now-a-days, I try to purchase items with cash/debit card. Finally, a second job doesn't hurt either; it's extra cash that can be used to help out and to put towards savings. LTRAIN... please read this book by Suze Orman: Young, Fabulous and Broke! Truly changed my financial thinking!!! Hope my input helps.
Message Edited by LhoreBaby on 03-08-2008 12:39 PM