Looking for advice on when to file BK

[Anonymous]

Hi!

I am a single mom who has been unemployed for almost a year and is currently finshing my masters degree. I had been able to keep all my debt current (70 thousand in CC's and 110 thousand in student loans) current but this month is my breaking point. I am out of savings and while I have never been late on anything- banks are dropping my limits as I pay and my credit score dropped from 720 to 623 due to the new reduced limits. I have also receivced all the notices of the new default rate being 29% for my cards so I know that once I miss a month- the downward spiral starts- late fees, over limit fees, closing the cards and that whole mess. I have thought about bankrupcty and want to file next month before my accounts are even 60 days past due since the banks are not even interested in working with me. I know I will see a big drop in my score but I will still be paying on student loans so hopefully that will start to rebuild my score right away. I just didn't know if it is better to file as soon as you know it's needed or wait until a few months of missed payments.

[credit911]

First let me say this is only my opinion...

If you know for sure that you are going to have to delcare bankruptcy, I would do it now for several reasons. First is the debt collectors, you will not have to deal with them calling your house place of employment, parents house, friends houses. This can be very embarrassing. Secondly, if you wait till you are behind on all the payments, some of your account will more then likely be transferred to other companies (not the original debtor) which can increase the chances of errors on your credit report. 

It is a big decision so think about it. If you are still sure you need a fresh start then I would do it ASAP.  Good luck with whatever you decide!

[Anonymous]

IS that when the credit card companies report?  At 60 days?

[krielly]

Mom,

I think it would make a lot of sense for you to schedule appointments with 2 or 3 different attorneys for free BK consults.

It's very wise to plan the best time to file! It's also good to know what your options are.

In our case, we didn't have any late payments before we filed. I think this is making it a bit easier to rebuild, as there are no "lates" in addition to our BK. In addition, when a lender reviews our credit reports, he can see this BK was an isolated incident, and a bump in the road. He or she will see on time payments both before & after our BK. Not a bad thing.....and helpful IMO.

K

[Anonymous]

Thanks!

Oddly enough, I have two years of law school under my belt so with "help" of my friends I am filing myself for Chapter 7. Most of the BK lawyers I spoke to through school said just file and move on because in a year my score would be better than if I continue to only make min payments and start being late. I can't afford a lawyer and I was able to get the fee waived for the credit counseling and am going to try to waive the fee when I file since if I had the money for the fee, I would pay a bill .

You answered my question since if I file next month, I will have no late marks and will be making payments on my student loans as I go through this crisis. I was concerned about the 90 day rule I have heard about but from what I was told and have read- the worst thing that the court can do is make you responsible for paying back those charges. I have bought gas and low cost charges as of last month but have shredded all cards so no more charges from now on.

 I just feel so bad since I wanted to pay everyone off but between my unused cards being closed and credit lines slashed- I have watched my score fall almost a hundred points in 8 months with never having missed a payment. If I get one more notice of "due to the economic conditions, we feel we Need to raise your rates/payments" I could scream

Congress acted a year too late for me

[krielly]

Mom,

Don't be surprised if your student loan lender will not accept payments during your Chap 7.

It's pretty standard practice for your SL's to go into deferrment until after you receive your discharge. Some lenders actually refuse to credit/accept your payments.

Good luck to you!

K