Should I file?

[Anonymous]

I don't know my current scores, I use credit karma and it says my score is 578. I was just approved for a capital one secured card but I've been back and forth about whether I should file bankruptcy. I'm 22 and I messed up my credit when I was in college for a few yrs and ended up having kids. Right now my total debt is around $80,000 but $55,000 of that is student loans, the rest is a combination of credit cards and repossessions. All the credit cards I had were low limit cards but the amount owed has sky rocketed. Most of my accounts are charged off or in collections. My new job has made me more aware of my credit and I want to get this under control. I want to avoid bankruptcy at all costs but I'm feeling like that's my only option. I was using lexington law but canceled that service. Anyone have any advice or been in my shoes before??

[llecs]

Before entertaining BK, I'd look to see if you can still be held legally for these unpaid debts. By law, a creditor has so many years (statute of limitations) to sue for that debt. If these were a few years ago, the debts might be too old to be sued on. How recent were the repos? How recent were the charge-offs? What state do you live in? Also, there is a credit reporting time period of 7-7.5 years for most bad accounts and you might be approaching that, meaning it'll delete soon anyway. At this point, ignore your score because a BK would only drop it more. If better credit is your goal, a BK would conflict with that; the damage per your report had already been done without the BK but a BK would drag it down more.

Are the SLs federally-backed?

[SoulMaster]

(see my sig for my disclaimer)

For what it's worth, the vast majority of Student Loans can't be discharged in a Bankruptcy.  So...  That means you have about $25,000 in dischargeable debt.

Using a simple formula for not-so-good settlement rates of 30¢ on the dollar, you can settle it all off for $7500.  Less, if you work hard or have someone help you do it (CO/Collections usually average 15-25¢ on the dollar).

I agree that you need to AVOID BK at all costs.  So let's do some math:  Having a good attorney prepare/file your BK will cost you anywhere from $1500 to $2000.  I'll shoot low and say $1500.  This means that the "gap" between your debt and what it would cost to file is $6,000.  So the question is, would you file BK for $6,000?  I can tell you that our firm probably wouldn't let you unless you had ZERO income or there were already a stack of judgements and you were being garnished severely. (We file BK only when it can't be avoided).

The second question is how long would it take you to save up that $?  If you cut your expenses and only saved $500/mo it would take you a year.  Once you settle the debts off, and they report as PAID/SETTLED you'll see your score start to rise, and the impact to your score will be minimal in 2-4 years, assuming you pay all your new TLs on time and manage your credit wisely.

So... If I were in your shoes, I'd pay the bare minimum on your SLs (maybe even call and see if I can defer payment) while I cleaned up this mess, then attack those head on.

Good luck to you,

-SM

[Anonymous]

Okay the SL's are deferred right now because I'm still attending school pt. Far as SOL on my cc they were CO as of 2009/2010 so the time frame is still early. I read somewhere that even if you pay your debts it still reflects negatively on your CR? Should I work on settling the CO and collection accts first? Most of my SL's don't have to be paid back till 2014-2016.

[SoulMaster]

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@Anonymous wrote:

Okay the SL's are deferred right now because I'm still attending school pt. Far as SOL on my cc they were CO as of 2009/2010 so the time frame is still early. I read somewhere that even if you pay your debts it still reflects negatively on your CR? Should I work on settling the CO and collection accts first? Most of my SL's don't have to be paid back till 2014-2016.

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YES! (they'll be the easiest).

And yes, settled debts will still be baddies on your CR, but even when combined they aren't NEARLY as bad as the BIG BADDY BK.  Also, they start healing they day they're reported as paid/settled.

-SM

[GCSCORE]

I was in your shoes and had considered filing as I thought that was my only way "out".....until I found out it costs money to actually file.  So I didnt go down that path and I dont recommend that you go down that path either.  I also dont recommend doing what I did do, ignore it and hope it would just disappear and that the CAs would eventually give up. Dont do that.  

What I do recommend is that you start by pulling your credit report to see exactly who is reporting what.  I'd start by paying off those accounts that have balances and have NOT gone to a collection agency.

Good luck!  You can do this.

[Anonymous]

They all are in collections or charged off. I was ignoring it but now I want to do something about it. I pulled my credit report so I know everyone I owe. How long till hard inquiries fall of your report? Hopefully with this site I can get back on track.

[GCSCORE]

hard inquires stay on for 2 years but only factor into your score for the first year.

for the charge offs, collection items on your credit report, if it's from EX or TU, you should see a field that indicates the month/date/year that the item will fall off your report.  I'd start with the newest and work backwards.  anything that is scheduled to fall off in 2012 or 2013, I wouldn't bother with.  Just let those age and attack the rest.

Also keep in mind that just paying something that is charged off or in collections does not increase your score simply because it is paid off.  On the flip side of that, you dont want to not pay off debit that has not reached SOL because then you are risking getting sued.

[ando35]

I don't know about student loans, but for regular debts, you can end up paying about half of what you actually owe when you do debt consolidation. The credit card companies are happy to get half of what you owe as ooposed to nothing. The trick is finding a decent and not crooked debt consolidation company. Be careful.