Hello everyone,,,I really enjoy reading through the forums and how inspiring/educational it has been for me to listen to unbiased individuals. It has been a blessing and I appreciate everyone who contributes to the forums.
I have a very general question and I'm pretty sure I know the answer to this but I love starting conversations and figured this could stir up some great ones.
If I am someone who only has 70k of unsecured debt, nothing else! What is the absolute worse that can happen to me if I just dont pay the creditors back? Is having a ton of late payments and collections on your report just as bad or worse than filing ch. 13? How far can an unsecured creditor go to collect? I understand that there will be many threats of collection but where do they draw the line.
I'm comparing this mainly to Ch. 13. I read somewhere that a collection goes away after 5 years or something of that matter. Would you file 13 and try to start over? Would you take the risk of not paying them back and waiting for all the collections to eventually go away?
I'm hoping to keep this more fact based vs. opinionated but any feedback/insight is much appreciated.
I'm not sure where you are going with this....but here goes.
depending on what state you are in, there is a statues of limitation that creditors can sue you for your debts. you signed a contract, therefore you are trapped.
one of the things that can happen, all the late payments, collections...this will reflect VERY VERY on your credit, which would continue on your record for at least seven years, and by that time, you would be lucky for any company to approve you for even a credit card...we are talking about all the derogatories compiled by $70,000 which will grow to possibly triple that due to fees and increased APR's to the max allowed by the law..within a year, that $70,000 debt might be around $150,000-$200,000.
When this happens, and it will, your credit score will not see the light of 500 until any of these negatives get settled. no bank will touch you. no car loans will touch you, especially in these credit crisis facing this country.
An amount ranging from $70,000-$200,000 is a big sum to the ccc, therefore, I am betting that they will not hesitate to sue you, and I am not even mentioning the harrassing phone calls (at home and at work...they will track you down), and they don't care who knows you have not paid your debts...although there are laws preventing abuse, they really don't get penalized enough for violating them, and you end up the one being embarrassed.
Once one of these ccc sue you, there is a possibility of you losing everything you have (house, car, assets) if you lose the case, which you probably will becasue they have your signature on file when you agreed to the terms and agreements of those credit cards. And issues of how you mishandled the credit and what it was used for MIGHT even arise in court.
Not only do you stand the possibility of losing what you have, but if it is not enough, then tehy can also garnish your wages.. If they win, they can ask for a court order to garnish your wages....imagine having to explain that to your payroll department...actually, the payroll department will just get a court order letter stating that they must garnish your wage....and this letter will follow you wherever you work.
all these public records, collections, late payments, charge offs...will stay on yoru report and as long as they do, your scores will probably not see 500 for quite a while.
you always have the option of paying the credit cards through priorities......
gather up all your bills....priority necessities first, house, utilities, cars.....any money left over after all "necessary" expenses will be put to pay off teh credit cards....arrange teh credit card bills from highest APR to lowest.....add up the minimum payments for all those.....
if your residual money is enough to pay off all the minimum payments for those cards, starting with the highest APR's first, then do so...if you still have money left over, then apply that to the bill with the highest APR.
if you do not have enough resifual to pay the minimums, then concentrate on the higest APR's and forego the rest...nothing else you can do.
but be honest with yourself. BK laws are designed for people who truly cannot cope with their past mistakes and truly have no means to repay. Trustees always seem to find causes if the system is abused.
I was in your situation about 3 years ago. We also had about 70K in unsecured debt. We weren't yet late on anything, but it was getting really tight. We balance transferred from one card to pay the other. There was no way we would ever be able to pay of the debt and we were only getting worse. We filed Chapter 13. It is a horrible feeling and the impact it has on your credit will last for years. I am sorry we had to do it, but looking back there was no other choice. We had credit scores in the 700's and we still had a ton of available credit even though were 70K in debt. It is a shock to fall from the 700's to the mid 400's. It is hard to learn to live without credit cards and is really stinks trying to rebuild your credit. My husband is in the mid 600's and I am in the low 600's three years later. I long for the day I can apply for decent cards again. If you really believe there is no way you can pay the debt back file ch 13. If you can pay it by any means try. Letting the debt just sit there and ignoring it is probably going to hurt you more than filing.
Starting Score 563 10/2/11 Current Score 585 12/30/11 Goal 700
One thing to consider is that if you file a ch. 13, then you can begin to rebuild your credit and your life from the date you file. I'm not sure how much you earn, but you need to be realistic and if you can't pay the debt in a reasonable time frame, then file the 13. Otherwise you'll just have this enormous debt hanging over your head for a very long time. And with such a large debt load, the creditors will hound you relentlessly and this will go on for a very long time if they don't sue. But once you file then they cannot contact you anymore. If you really don't have any assets, then you could come out much better than you might think in the 13. It is possible to start rebuilding your credit while you're in the plan too, it will just take a little time. I would shop around for a good BK attorney and see what your options are.
Tigercat is right. You can begin to rebuild your credit while in the ch 13 plan. We received cc's while in the plan. Although most of them are crappy cards it is a start and it does help rebuild credit. It will probably be years before my credit is what it once was, but had we just ignored the bills and not filed I think it would have taken a lot longer to see any progress at all.
Starting Score 563 10/2/11 Current Score 585 12/30/11 Goal 700