Hi all, long time member, in trouble now...
My credit journey started about 5 years ago when my scores were in the 500's. I was really careful with my credit and always made sure to keep my utilization down. Fast forward a few years, my scores were in the high to mid 7xx range. I had over 100k in available credit! Fast forward to today, I've gotten into a lot of trouble with credit card debt and I'm ashamed of it. Most of it was overspending and being irresponsible, with a plan to repay it all and the debt just got bigger and bigger. My mom became sick and my brother lost his job so I got into some more debt trying to help them while trying to keep my head above water.
Throughout the years, I've come to accumulate roughly $75k in credit card debt and $25k in a personal loan through my credit union. I have no missed payments, no collections, no negative marks. My scores however, have sunk to 610EQ/660TU/605EX. Mostly due to high utilization...My scores began to tank harder when other creditors began to decrease my limits as they seen I was probably becoming high risk. For the last year and a half to two years, I have been getting by just by making the minimum payments on my cards. Some of the minimums are 700/459/375/etc..etc..., below ill do a breakdown of my income + balances and minimums:
Total Income: $2k/weekly ($8k month)
Total minimum payments (credit cards): $2,029/month
Total minimum payment (personal loan): $685/month
Rent: $3k/month
Car: $1200/month
Car Insurance: $300/month
Total payments: $7,214 (not including utilities, food, union dues, misc).
As you can see, I've dug myself a pretty nasty hole that feels like I'll never get any relief from. I am making a lot of money a year but it's all going to waste in interest and minimum payments. The avg interest rate is around 20% on those debts.
I could use any advice or help here! My goal is to substantially lower my monthly payments, whether it be bk13 or debt settlement. I've never been down this road but I've come to the point where I can't breathe and am drowning in minimum payments every month. What are your recommendations for me? I am desperate at this point and am willing to do whatever. My big thing is I would like to keep my vehicle. Do I even qualify for chapter 7?
Please help 
Just to preface...I'm not an attorney, but I deal with stuff like this every day.
You likely, IMO, depending on where you live, do NOT qualify for CH7. If you do, it would likely be via passing the means test. If so, and you are truly overwhelmed (which it appears), that would probably be my recommendation. In this scenario, your creditor and BK trustee would probably let you reaffirm your car loan. Doing this would ensure it begins to report on your credit AFTER the BK7 is discharged in 3-4 months. You can likely also just continue paying without reaffirming the debt...doing this will result in it NOT showing on your credit any longer with payment history going forward, BUT you wouldn't have to worry about negative credit reporting should the vehicle be reposessed in the future since it was included in BK and NOT reaffirmed.
As far as CH13 goes, it would be repaid (based on what the trustee deems you can afford) over the course of the next 36-60 months and your car loan would be part of the repayment.
Debt Settlement/Debt Management are a bit more tricky as there aren't LAWS in place (i.e. BK) defining exactly what can and cannot happen.
In debt settlement, you would likely have tax implications for the amount of debt forgiven and would need funds upfront (or over the course of roughly 3-12 months) to settle the debt. The account would be closed and it would be a negative hit to your credit that would take roughly 2 years to recover from as far as score impact goes.
Debt Management is something that can be done directly with each creditor or even with a third party. In this case, you repay your whole debt typically only removing late/over limit, etc fees and drastically reducing the interest rate. For example, Discover is one of the best in-house debt management programs around and they offer 0.99% with fixed payments over the course of 60 months. In this scenario, your creditor will likely close your account and it MIGHT be eligible to "reopen" once you successfully complete the program.
I hope this is enough to at least give you a rough idea. Feel free to ask any additional questions you may have or clarification on anything I've stated. It also doesn't hurt to speak to an actual attorney since most charge nothing for an initial consultation via phone or in person.
You're right on what you've heard regarding BK13 consumers. It's what's commonly referred to as a wage earner plan and is intended to have less negative impact on your credit vs a CH7 (7 years vs 10 years) and intended to give your secured (priority) creditors and then unsecured creditors (non priority claims) as much as possible in a term up to 60 months.
Based on what you've stated (again, I'm NOT an attorney) I would personally try to a CH7 or do debt settlement. With regards to not paying your unsecured creditors, that is what most do since credit in the short term is not something of concern. In doing so, your creditors will charge off your account(s) by the 180 day delinquency mark...some as soon as 120 days delinquent. Once they do this, some will file a lawsuit against you. It's somewhat rare they do this soon after delinquency, but it's their legal right. There are some creditors that are more "sue happy" than others...AMEX and Discover being a couple of them.
No matter what, I'd recommed you weigh all your options before making a decision. Look at all your bills (rent, utilities, groceries, etc) and see how much you could "save" each month by ONLY paying for the roof over your head, utilities, groceries, car insurance, car payment if keeping the car, etc. Do the math on what creditors you could potentially settle with and when based on your "savings" rate. Most creditors get very agressive with their offers just before charge off date (150-179 days past due) and then some are much better post charge off. The risk run when it charges off is that credit impact is slightly more damaging than a settled account prior to charge off in addition to the possibility of them selling the account to a third party which almost always adds headache to the scenario. All that to say most creditors at the 120+ day delinquent mark will accept a settlement amount of anywhere from 10-40% of the current balance, with most I see being in the 25-35% range. I'd recommend using this percentage when calculating what you can settle.
Sorry for the rambling, but I hope this helps. Again, feel free to ask any additional questions you may have or clarification.
Sorry, I missed a question in there.
If you were to negotiate a settlement with a creditor, and then turn around to file a CH13, your creditor would then NOT be legally obligated to the agreed upon settlement amount since the agreement would have not been satisfied on your end. This verbiage is very commonly placed into settlement agreements with most, if not all, creditors. After all, if it were that easy, everyone would do it! To answer your question, no that is not illegal...just highly unlikely that it would be successful.
@Anonymous wrote:Hi all, long time member, in trouble now...
My credit journey started about 5 years ago when my scores were in the 500's. I was really careful with my credit and always made sure to keep my utilization down. Fast forward a few years, my scores were in the high to mid 7xx range. I had over 100k in available credit! Fast forward to today, I've gotten into a lot of trouble with credit card debt and I'm ashamed of it. Most of it was overspending and being irresponsible, with a plan to repay it all and the debt just got bigger and bigger. My mom became sick and my brother lost his job so I got into some more debt trying to help them while trying to keep my head above water.
Throughout the years, I've come to accumulate roughly $75k in credit card debt and $25k in a personal loan through my credit union. I have no missed payments, no collections, no negative marks. My scores however, have sunk to 610EQ/660TU/605EX. Mostly due to high utilization...My scores began to tank harder when other creditors began to decrease my limits as they seen I was probably becoming high risk. For the last year and a half to two years, I have been getting by just by making the minimum payments on my cards. Some of the minimums are 700/459/375/etc..etc..., below ill do a breakdown of my income + balances and minimums:
Total Income: $2k/weekly ($8k month)
Total minimum payments (credit cards): $2,029/month
Total minimum payment (personal loan): $685/month
Rent: $3k/month
Car: $1200/month
Car Insurance: $300/month
Total payments: $7,214 (not including utilities, food, union dues, misc).
As you can see, I've dug myself a pretty nasty hole that feels like I'll never get any relief from. I am making a lot of money a year but it's all going to waste in interest and minimum payments. The avg interest rate is around 20% on those debts.
I could use any advice or help here! My goal is to substantially lower my monthly payments, whether it be bk13 or debt settlement. I've never been down this road but I've come to the point where I can't breathe and am drowning in minimum payments every month. What are your recommendations for me? I am desperate at this point and am willing to do whatever. My big thing is I would like to keep my vehicle. Do I even qualify for chapter 7?
Please help
I feel your pain. Will try to be brief. Ch 13 is HELL. Unless you have a house with lots of equity, I would default and see who sues. I promise you, only some will, and you can settle with them. Stop paying all of them!
I can't help but note that you have a ..... really? ..... $1200/month car payment? LOL. I lived in LA for 3 years and cars are very important in CA, but you need to get rid of that -- I don't care if it is a Bentley. That is ABSURD. I'm serious and not judgmental.
Are you employed in a field that is relatively easy to find new work in? Like software, etc.? If you are the very best thing you can do is to quit your job, right now, stop paying your bills, and wait until you file to look for work. I believe for a Chapter 7 they ask for your income over the last six months and require bank statements (it is something like this.). It's not like they average your last 3 years of income. It's like the last 6 months. Heck, that $1200/month car payment alone would help you find a roof over your head. Do you have family or friends with whom you can couch surf?
I am SERIOUS.
And if anyone tells you that a chapter 13 is better than a 7, they are very much mistaken. The only people who should file a 13 are folks with substantial equity in things like homes that would otherwise be lost when the chapter 7 trustee sells off your assets to pay your creditors.
Feel free to PM me if you like. I know this stuff inside and out. I've spent 1000s of hours studying it.
@CH-7-Mission-Accomplished wrote:
@Anonymous wrote:Hi all, long time member, in trouble now...
My credit journey started about 5 years ago when my scores were in the 500's. I was really careful with my credit and always made sure to keep my utilization down. Fast forward a few years, my scores were in the high to mid 7xx range. I had over 100k in available credit! Fast forward to today, I've gotten into a lot of trouble with credit card debt and I'm ashamed of it. Most of it was overspending and being irresponsible, with a plan to repay it all and the debt just got bigger and bigger. My mom became sick and my brother lost his job so I got into some more debt trying to help them while trying to keep my head above water.
Throughout the years, I've come to accumulate roughly $75k in credit card debt and $25k in a personal loan through my credit union. I have no missed payments, no collections, no negative marks. My scores however, have sunk to 610EQ/660TU/605EX. Mostly due to high utilization...My scores began to tank harder when other creditors began to decrease my limits as they seen I was probably becoming high risk. For the last year and a half to two years, I have been getting by just by making the minimum payments on my cards. Some of the minimums are 700/459/375/etc..etc..., below ill do a breakdown of my income + balances and minimums:
Total Income: $2k/weekly ($8k month)
Total minimum payments (credit cards): $2,029/month
Total minimum payment (personal loan): $685/month
Rent: $3k/month
Car: $1200/month
Car Insurance: $300/month
Total payments: $7,214 (not including utilities, food, union dues, misc).
As you can see, I've dug myself a pretty nasty hole that feels like I'll never get any relief from. I am making a lot of money a year but it's all going to waste in interest and minimum payments. The avg interest rate is around 20% on those debts.
I could use any advice or help here! My goal is to substantially lower my monthly payments, whether it be bk13 or debt settlement. I've never been down this road but I've come to the point where I can't breathe and am drowning in minimum payments every month. What are your recommendations for me? I am desperate at this point and am willing to do whatever. My big thing is I would like to keep my vehicle. Do I even qualify for chapter 7?
Please help
I feel your pain. Will try to be brief. Ch 13 is HELL. Unless you have a house with lots of equity, I would default and see who sues. I promise you, only some will, and you can settle with them. Stop paying all of them!
I can't help but note that you have a ..... really? ..... $1200/month car payment? LOL. I lived in LA for 3 years and cars are very important in CA, but you need to get rid of that -- I don't care if it is a Bentley. That is ABSURD. I'm serious and not judgmental.
Are you employed in a field that is relatively easy to find new work in? Like software, etc.? If you are the very best thing you can do is to quit your job, right now, stop paying your bills, and wait until you file to look for work. I believe for a Chapter 7 they ask for your income over the last six months and require bank statements (it is something like this.). It's not like they average your last 3 years of income. It's like the last 6 months. Heck, that $1200/month car payment alone would help you find a roof over your head. Do you have family or friends with whom you can couch surf?
I am SERIOUS.
And if anyone tells you that a chapter 13 is better than a 7, they are very much mistaken. The only people who should file a 13 are folks with substantial equity in things like homes that would otherwise be lost when the chapter 7 trustee sells off your assets to pay your creditors.
Feel free to PM me if you like. I know this stuff inside and out. I've spent 1000s of hours studying it.
Not just those, but also if you have back taxes as well 13 is the only option unless you're eligible to discharge those taxes in 7. That is why I'm in 13 and have about 14/15 payments left on my plan. Just remember those lates would stay on your credit report, 7 years, close to the same amount of time as a 7 would and 7 would give you a fresh start. Lates stay on for 7 years while a BK7 remains on for 10 years. Definitely consult with different attorneys and weigh your options.
