@ucigrad05 wrote:
Ok first time posting, here we go:
I owe roughly $85k
30k Personal loans
50k credit cards
5k taxes
Multiple accounts 120 days late(no collections or charge offs on credit report).
Currently I am on the hook to have a $1,600 payment for the next 60 months.
Option 1, bite the bullet, pay about $92k(includes fees) total over 5 years
or
Option 2. I have been calling my creditors the past week and many are offering 30-50% reduction. I am able to bring my total balance down to about 50k, except for taxes have to be paid at 5k. This bring my total to roughly 55k.
I have some equity in primary residence that I have not touched due to terrible rates. However, I am at a crossroads not sure if I should cash-out refi $55k to pay off the debt in one-time settlement payments or go through with the ch 13. My credit has already taken a hit with the multiple 120 day lates. I dont know why I didnt think of this earlier, but life happens.
thank you for reading and any advice.
I'm with Dave Ramsey on this one. Moving unsecured debt over to something that can take your house is one of the worst things you could possibly do.
I'd get with a bankruptcy lawyer and have them assess the situation and tell you what you're looking at paying back under a Chapter 13, because you'll get your discharge after the 5 year payment plan and the interest is much more reasonable than credit card debt. While it's not a straight up "Get out of Jail Free" card on the debt like a bk7 would be, like I went through, a bk7 is also for people who basically have nothing left by the time they file and blood/turnip situation. But if it's any consolation, that hurt like hell. It's going to be on my report for what seems like forever. It was years ago and I'm looking near the end of the decade. A bk13 I believe falls off after 7 years, and is not as damaging to your credit rating because your creditors didn't take a bath and lose everything on you.
Odds are, a bk13 will wipe out most of your debt anyway and without risk to your house. It's better to live with stained credit than it is to risk being thrown out on the street by your local Sheriff's department so the bank can take your home and sell it to someone else.
Where do you plan on living if that happens?
I mean, these are all things I'd be looking at in your case. $50,000 to the credit card people is still a lot of money, you said it yourself these rates on a HELOC are terrible, a HELOC means you risk losing your house, and at the end of the year you owe Uncle Sugar $5,000 on all this and have a tax problem too.
I mean, bk13 sounds....less bad. You can live without your credit cards. Try renting if you lose your home. Most landlords are an absolute nightmare, just letting the place fall apart while they raise rent, and you'll never own it. They know there's a power imbalance and if you go to the city about them and they know it was you, they'll probably stick a non-renewal notice on your door the next time the lease is up.
I'm guessing you signed on your mortgage when rates were a lot better if you're sitting on enough equity to consider a HELOC.
With a bk, it's important to keep perspective. The sun will rise again. And like everything in life, it gets bad, then it gets better again, and that's just the way things tend to go.
