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Should I file Chapter 7

Pharoe33
Regular Contributor

Should I file Chapter 7

I’m currently working to reestablish my credit but have been told that I should consider chapter 7 bankrupt. I currently have around 20K in cc debt that I’m working to pay off. I also have a car loan through NFCU that has me upside down in negative equity by 15K. My current salary is 70K a year with an additional 30K from military retirement.  My current FICO 8 scores are:

 

EX-617

TU-629

EQ-579

 

My Baddies are:

1)NFCU Flagship CLOSED ($15000 limit / $12000 balance)

***10 lates in last 24 months (30 days x 4, 60 days x 3 90 days x 3)

2)NFCU rewards * CLOSED ($15000 limit / $13000 balance)

***10 lates in last 24 months (30 days x 4, 60 days x 3 90 days x 3)

3)USAA credit card *Chargeoff ($7800)

4)Two Collections ( one on experian and the other on equifax) both are being disputed for inaccuracies.

5)Aafees charg-off (due to fall off next year)

 

Any assistance or recommendations would be greatly appreciated. My ultimate goal is to get a hold of things so that I can purchase a home in the not so distant future. I don’t know if Bankrupt will assist me or hurt me in the long run.

Message 1 of 9
8 REPLIES 8
pipeguy
Senior Contributor

Re: Should I file Chapter 7

In my opinion with $20k in debt (I'm not counting the car, although I'm not sure how you could be that much upside down, you'll still need a car)) and with a $100k annual income you should NOT declare bankruptcy - I'm not even sure you'd be discharged with that kind of cashflow. If I were you I'd buckle down and pay things down as quickly as possible and you'll recover fairly quickly. Bankruptcy on the other hand is 10 years of haunting, not so much that you can't recover creditwise, but it'll haunt you at times and 20% of your annual income is not worth that price IMO.

 

Again in my opinion, bankruptcy should be used as a matter of last resort, not as a matter of convenience and yes I've been there, much MUCH worse than $20k in the hole and I recovered without bankruptcy, so my advice is from that point of view too. 

Message 2 of 9
Pharoe33
Regular Contributor

Re: Should I file Chapter 7

Absolutely, I greatly appreciate your advice.

Message 3 of 9
SteelerNYC
Valued Contributor

Re: Should I file Chapter 7


@pipeguy wrote:

In my opinion with $20k in debt (I'm not counting the car, although I'm not sure how you could be that much upside down, you'll still need a car)) and with a $100k annual income you should NOT declare bankruptcy - I'm not even sure you'd be discharged with that kind of cashflow. If I were you I'd buckle down and pay things down as quickly as possible and you'll recover fairly quickly. Bankruptcy on the other hand is 10 years of haunting, not so much that you can't recover creditwise, but it'll haunt you at times and 20% of your annual income is not worth that price IMO.

 

Again in my opinion, bankruptcy should be used as a matter of last resort, not as a matter of convenience and yes I've been there, much MUCH worse than $20k in the hole and I recovered without bankruptcy, so my advice is from that point of view too. 


^^^this 100%

Ch 7 Discharge May 2015
Discover/Target/NFCU CLOC/NFCU More Rewards Amex/NFCU Platinum/PenFed Power Cash Rewards/PenFed Pathfinder Visa/Citi Costco Visa/CapitalOne SavorOne/Apple Card - $139,100 total revolving, 21% utilization
3.25% mortgage July 2020, $20k used Auto Loan October 2020, $20k PenFed Personal Loan Dec 2020
687/683/673 EX/EQ/TU w/ 5/6/6 INQs as of Jan 2021
Spending 2021 in the Garden
Message 4 of 9
jw2016
New Contributor

Re: Should I file Chapter 7

I would agree that with a high income it is likely that you would have to file a Chapter 13.  I would say if you can work out favorable payment arrangements  that you can afford with your creditor that might be the best route.  However, if that is not possible, or you get sued it might be worth a consultation with a bankruptcy lawyer.  

Chapter 7 Discharge 12/2011
12/2016 TU 726 EX 724 EQ 719
Message 5 of 9
wa3more
Established Contributor

Re: Should I file Chapter 7

100% what Pipe said. Good advice

Message 6 of 9
joe8185
Valued Contributor

Re: Should I file Chapter 7

Agree with the above. With your current income and debt, it's not clear that you'd qualify for Chapter 7, though Chapter 13 is a possibility. However, I concur that you would be better advised to work to make arrangements to pay down your existing debts, depending on how much you can afford per month. You should discuss this with a good BK attorney but it appears that what you really need is to contact a reputable credit-counseling nonprofit that can help you arrange payment plans with your creditors.

Ch 7 BK discharged 11/28/14, credit rebuild well advanced. FICO:TU 680 FICO 8 (3/2/19) or 687 FICO 9/EX 694 FICO 8/EQ 685 FICO 8 or 674 FICO 9 (NFCU 3/3/19), VS 3.0 10/17/18: TU 702/EX 699/EQ 698. $92.9k revolving credit as of 1/31/19; $1K NFCU cashRewards Visa, $2K BJ's Perks MC, $5.1k Discover It #1, $6.5k Discover It #2 (new 3/12/18), $3.5k Petal Visa, $6k Paypal 2% CB MC, $6k Amazon Prime Store Card, $6k Walmart Store Card, $7k Apple FCU Platinum Visa, $7k Penfed Power Cash Rewards Visa, $11.8k Overstock Store Card, $15K Care Credit, $16K Cap One QS Rewards Visa Signature, $10k PenFed used car loan, $5k Navient student loan, $12.7k Lending Club loan. Gardening: 3 months, 19 days as of 1/31/19. 24 HP inqs total as of 10/12/18: 10 TU, 9 EQ, 5 EX (about half over 1 year old).
Message 7 of 9
AussieByChoice
New Member

Re: Should I file Chapter 7

I think that generally speaking, those who've responded already have given good advice under normal circumstances, but I have some concerns.  I think that to accurately answer your question you have to ask yourself, "How did this happen?"

 

You make $100K but have a charge-off of nearly $8,000 and two other accounts that are nearly maxed out into the five figure range as well as a couple of collection accounts. Reading this, one can't help but wonder if you have the discipline to dig out if this.  Of course I mean no disrespect in saying that, because I'm recovering from a Chapter 7 so I shouldn't throw stones.  That being said, the decision to file bankruptcy was the single most difficult decision of my life, but also hugely positive in the end.  

 

In October 2011, I quit a 200K per year job on a whim.  I was burnt out.  I hated my boss.  I hated my colleagues.  I hated my life.  I spent five month traveling and decompressing and although I went back to work in March 2012, the damage had been done.  My new job paid me a little over 125K, but I had accumulated nearly $40,000 in debt in the five months that I was unemployed.  Amex flagged my account because the balance shot up so quickly, cut my credit limit and refused to reinstate it unless I could prove that my income hadn't changed.  I could not.  My interest rate was raised and suddenly I was trapped.   I paid everything on time, but had nothing left at the end of the month.  

 

Under normal circumstances I would not have qualified for Chapter 7, but my new employer insisted that I go back to school for a masters degree and made me sign a contract to that effect.   Because the degree would not impact my scope of practice, it was considered an unreimbursed educational expense and I was able to apply the $1,500 per month tuition charge to the means test which satisfied the bankruptcy court and so in March 2014, my bankruptcy was discharged.  Suddenly I was free and I've used the experience, albeit a humiliating one, to reestablish myself.  A year after discharge, my credit union gave me a Mastercard with a $5,000 limit. A year after that I went to the local VW dealer and drove off in a new Passat two hours later.  And, just last week, my spouse and I closed on a house.

 

I guess my point here is that I used bankruptcy to wipe out a bunch of debt that accumulated as the result of extenuating circumstances.  In my case, it was a midlife crisis, and I don't foresee another anytime soon.  I have a good job and have gone back to my usual responsibile behavior, which my creditors have recognized.  On January 31, 2014 when I filed chapter 7, my credit score was 749.  Today, just over three years later it's 709 and financially I'm stronger than I ever was.  I no longer have an American Express Platinum card, but who cares?  Those guys were less than understanding when **bleep** went down.  

 

My my advice is this, before making a decision, talk to an attorney.  Bankruptcy isn't the end of the world,  but if what caused your financial distress hasn't gone away, then it isn't likely to be the answer you're hoping for.

 

Best of luck in whichever route you take!

Message 8 of 9
joltdude
Community Leader
Senior Contributor

Re: Should I file Chapter 7

id try negotiation with Navy Fed for a payment plan on those closed accounts...

Probably won't reopen the cards but iv heard theve offered to drop the APR dramatically on the closed accounts to get it paid off..

 

 

 

Message 9 of 9
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