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Stressed and up to my eyeballs in debt...is Ch 7 the way to go?

elevate83
New Member

Stressed and up to my eyeballs in debt...is Ch 7 the way to go?

I'm not one to put my financial problems out for the public to see but I really need some advice.  I am considering filing for Chp 7.  I have a meeting with my first attorney candidate on Tuesday.  However, I'm concerned that I will not pass the means test.  Here's my story.  

(I'm not perfect and made poor financial choices but also had to use CC's to pay for school and medical treatment.  Please be constructive rather than trash my psyche and make me feel like moron.  Believe me...I'm doing enough of that on my own.  I'm embarrassed and ashamed to be 37 years old and in this position.)

 

I started grad school in the summer of 2018.  I am also a healthcare provider at a local hospital.  I couldn't work OT because there was none available and I was in a labor intensive grad school program (however, this winter, I did it to make ends meet so that I could pay the minimums on my bills).  I also live in a terribly expensive city (Denver) and I also made some poor spending choices.  Given my current situation, my unsecured debt payments are equal to $2,000 a month, give or take.  I use my monthly salary to pay the minimums and rent but I have to use my credit cards to live, perpetuating a vicious cycle.  So...each month I go more and more into debt.  And there is no way to keep current on my payments and not use credit cards for 90 days, leading up to filing - I'm not buying luxury things, I'm literally buying groceries, gas and paying my cell phone bill.  And, to top this all off, in September, the grace period for my student loans will end and I will have to pay another $1,000  month to those...which I'm not even close to being able to pay.

 

I literally have no idea what to do.  I can't get a second job because this one is now 5-6 days a week plus I am still in school full time.  I've sold everything that has any monetary value that I don't use on a daily basis.  But I feel like I won't pass the means test for Chp 7 right now, given the last 6 months of income, the bonus I received in March and the fact that my student loans aren't in repayment right now...so that means Chapter 13 because of my "disposable income" that it looks like I have for 4 more months.  When my loans kick back in, I wouldn't be able to pay my trustee payment or my student loans.  To make matters worse, I'm up for a promotion that would increase my salary to $94K annually and I would no longer be hourly but that likely won't kick in until the fall, IF i get the job or if the hospital is even going to fill the position.  

 

Help!  Any insight you guys have would be so helpful.  Thanks.

 

Financial Snapshot

Anticipated Income:  

- Salary:  $96,000, gross (based on the last 6 months of income; this allows me to pay my bills and rent only)

  • Realistically, I'll make somewhere in the neighborhood of $80-85K.  I'm an hourly employee; OT is no longer allowed, they took away our raises and bonuses because of the financial position of the hospital and our crisis incentive pay made up a lot of what I got paid from November to April.  I also received an annual bonus in April that will no longer be paid going forward - thanks, COVID-19.
  • To put this in perspective, if I only received my hourly wage with nothing added in like shift differentials (which only equals only another $850 annually), didn't get a raise and worked no OT, my annual gross income would be $62,600.  This is likely what will happen because of the financial plan for the hospital.  If I only made this, there is NO WAY I could pay my bills every month.

 

Debts:

- unsecured debts:  $72K (credit card and debt consolidation loans.  And, I want to continue to have no late marks on payments up until I can file, based on things I have read in this forum)

- school loans:  170K (private and federal; I'm aware these will not be discharged under bankruptcy...perks of having Uncle Sam finance my 3 degrees)

 

Assets:

- car:  $7,100 (clear title; paid off in February 2020)

- 403b:  $16K (has 2 loans against it, totalling $11K that I am paying directly from each paycheck; not currently contributing to 403b)

 

 

 

19 REPLIES 19
FrenchFico
Regular Contributor

Re: Stressed and up to my eyeballs in debt...is Ch 7 the way to go?

I'll let the experts give you advice on what to do but I just want to send you some encouragment. No one is perfect so don't beat yourself up about it. We make mistakes and stuff happens. Good luck with getting everything back on track. 

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Message 2 of 20
Mjhall85
Frequent Contributor

Re: Stressed and up to my eyeballs in debt...is Ch 7 the way to go?

I'm no expert but when I finally filed my chapter 7 it was a relief. I thought about it for nearly two years then finally did it. I'd meet with a few attorneys and see what they say. A chapter 13 may work for you and alleviate the stress where you just pay one payment and the trustee disburses the fund to debts. Like frenchfico said we're not perfect. I hope Tuesday you get some better light shed on your situation. 

Chapter 7 filed 2/3
Discharged 6/30

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Message 3 of 20
FireMedic1
Super Contributor

Re: Stressed and up to my eyeballs in debt...is Ch 7 the way to go?

You'd be surprised what I'm going to say. There are many people that rent a room in their house. One price. You'd only have to pay a small rent. Utilities included. Place your stuff in storage. All your income could go to paying the debts down. As you said you were living the high life and you hit a curve in the road that you wont be able to complete and go off the cliff eventually. Time to make some changes and possibly aviod BK all together. Once its all paid and you keep your good history. Job may get better, more income, and lessons learned. You wont go down that road again.






Homeowner since Sept 2020. My posts are JMHO. My siggy is not to brag. Just sharing my experiences after BK from learning here from rebuild to recovery from the @ 540's.
Message 4 of 20
elevate83
New Member

Re: Stressed and up to my eyeballs in debt...is Ch 7 the way to go?

Thank you - I appreciate that!  

Message 5 of 20
elevate83
New Member

Re: Stressed and up to my eyeballs in debt...is Ch 7 the way to go?

I'm glad to hear it was a relief.  I have had really great credit up until the last two years and seems things just fell apart.  I also appreciate the vote of confidence.  I'm just terrified of when my student loans start back to repayment.  And I'm also scared I won't pass the means test.  We shall see!  Hopefully I get some reassuring news - or at very least some better direction.  Thank you!

Message 6 of 20
elevate83
New Member

Re: Stressed and up to my eyeballs in debt...is Ch 7 the way to go?

I totally hear what you are saying but I don't agree that I've been living the "high life"; I have no fancy cars, clothing, electronics or expensive vacations to show for the spending.  I was sick, getting treatment and paying for school so that I could get a better job.  I've been living paycheck to paycheck for the last two years and it has finally hit its breaking point.  I've looked at all of the things you suggested and there are two things that stand out.  1...I'm in a lease that has a huge lease break fee that I couldn't negotiate my way out of or pay outright and if by some chance I could, I would still be paying $700-900 in rent, plus storage fees and the lease break monthly payment and poor rental history reporting, per my landlord.  2...even if I paid no rent, I wouldn't be able to pay more than the minimums and would be exactly where I am now in September when my loans kick in.  I've been working my butt off to just keep afloat.  I want to keep all of my good history and that's why I've been working so hard to stay current.  I'm just stuck and I don't know what to do.  

On another note, I appreciate the feedback and will definitely keep those things in mind.  Smiley Happy

Message 7 of 20
Em71
Frequent Contributor

Re: Stressed and up to my eyeballs in debt...is Ch 7 the way to go?

Obviously, bankruptcy will be a huge derogatory on your credit.  If your good history is important, you should avoid bankruptcy.

 


@elevate83 wrote:

I totally hear what you are saying but I don't agree that I've been living the "high life"; I have no fancy cars, clothing, electronics or expensive vacations to show for the spending.  I was sick, getting treatment and paying for school so that I could get a better job.  I've been living paycheck to paycheck for the last two years and it has finally hit its breaking point.  I've looked at all of the things you suggested and there are two things that stand out.  1...I'm in a lease that has a huge lease break fee that I couldn't negotiate my way out of or pay outright and if by some chance I could, I would still be paying $700-900 in rent, plus storage fees and the lease break monthly payment and poor rental history reporting, per my landlord.  2...even if I paid no rent, I wouldn't be able to pay more than the minimums and would be exactly where I am now in September when my loans kick in.  I've been working my butt off to just keep afloat.  I want to keep all of my good history and that's why I've been working so hard to stay current.  I'm just stuck and I don't know what to do.  

On another note, I appreciate the feedback and will definitely keep those things in mind.  Smiley Happy

 

Message 8 of 20
elevate83
New Member

Re: Stressed and up to my eyeballs in debt...is Ch 7 the way to go?

Obviously - I'm very much aware of that and if I can find a way to avoid it, I will absolutely do that.  When I mentioned that, I was looking forward at relationships with banks after my BK discharges and work through my rehab, should I be able to file.  I was hoping that a positive payment history would help me down the line when wanting them to do business with me in the future - and this is based on the posts of other contributors in this forum regarding staying current until the day you file.  That said, if you feel that being late in addition to a bankruptcy doesn't change the outcome in the sense of preserving some portion of my payment history and relationships with creditors in the future, well thats a totally different conversation.  We'll see what happens with the attorneys on Tuesday.  Thanks for your thoughts.

Message 9 of 20
Jnbmom
Community Leader
Super Contributor

Re: Stressed and up to my eyeballs in debt...is Ch 7 the way to go?

I don't think it matters if you were never late in regards to your creditors , you are burning them in BK that's the only thing they will remember.  Staying current usually benefits your credit profile with no lates charge offs etc prior to BK. But in terms of the creditors they will only remember the amount you burned them for.

With your income I think chapter 13 may be your only option.

EXP 758 TU 783 EQ 729
Message 10 of 20
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