Todd1225

Considering BK...please comment....

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Hello, my name is Todd. I ran across this site while looking for BK attorneys in my area. I have been considering BK or debt "settlement" for awhile and thought I would ask a few questions.

I'm 29 married for 7 years, but I am chin deep in CC debt. I owe $15k to one card and 10k to another card, a combination of denial, misfortune and useless spending are too blame.

Our house has NO equity, we have two cars, one is paid for (worth about $5k) and another car that we probably owe more than what's it's work. Our mimimum payments on the two cards is about $850.00 a month, we always make the payments on them as well as the house. We have considered BK because even with selling items and paying as much as we can, we MAY get out of debt within 5-7 years.

1st attempt at getting out:

CCCS, they were only able to save us $150 a month, since one of the CC companies would not agreed to a debt management plan.

2nd attempt to get out:

We received an offer from XXXX Bank to "consolidate" our debt into one payment. They were "advertising" that we could pay off $25k in debt for about $500 a month. Hmmm, sounds better...we could save $400 a month, buy a used car cash and sell the "luxury" car and save another $525 a month, then we could double up on the payments to XXX bank and have everything payed off in half the time. Well, XXX bank shot us down, my wife my two mortgage payments late (in 2 and a half years).

Conclusion:

Even with cutting expenses to the bone and working extra, there is no reasonable time frame to pay everything off. At this point any major bad event could easily put our efforts down the tubes. Plus, we want to have a child as we are getting close to that "age" where things may be affected...but we simply cannot afford it. Even with kicking butt and managing our money, life would suck for 5-6 years and I think it would be tough to pay them off within that time frame. I'm ready for a fresh start and to relieve some of this mental pressure, me and the wife have been at each other's throats!

Well, I don't really think there is anything the CC company can try to take, our house has NO equity and the only thing we owe on is a car, although one is paid for. I think the problem that me and the wife has is the meeting in the courts...that is here biggest concern as she works with some of the officials at our local courthouse.

Can someone make us feel better about BK and what all is involved.

Thanks,

Todd in Georigia

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What do you want to know ?

The first thing you should do is go see 2 or 3 bankruptcy lawyers and see what you'd be looking at. Most of them give free initial consultations.

Debt 'settlement' companies will REALLY ruin you and probably get you sued anyway, so stay away from them. What they do is tell you to stop paying all your bills and send them some huge chunk of money. While they accumulate YOUR money (and they get their fees on top !!), your credit goes into the toilet, creditors will harrass you and might even sue. It will take months to 'save' enough money to make a reasonable settlement. Its not worth it.

You can recover faster from bankruptcy than you ever will the way things are now.

Exemptions for bankruptcy in GA are here:

http://www.bankruptcyaction.com/gaexemptions.htm

I believe the homestead exemption has gone up recently, but a lawyer will certainly know that.

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What do you want to know ?

Debt 'settlement' companies will REALLY ruin you and probably get you sued anyway, so stay away from them. What they do is tell you to stop paying all your bills and send them some huge chunk of money. While they accumulate YOUR money (and they get their fees on top !!), your credit goes into the toilet, creditors will harrass you and might even sue. It will take months to 'save' enough money to make a reasonable settlement. Its not worth it.

You can recover faster from bankruptcy than you ever will the way things are now. .

Well, we were referred to our particular debt negotiation company by an "friend" in one of my online car club message boards. We feel pretty confident about the company itself, but I do share the same concerns about the process that you mentioned.

The company says that 50% on the dollar is about what they settle for, going by that figure it would take us about 14-16 months to save up and that's if we pay more monthly to them than we are paying on the cards right now. ($850 now and barely making it). I just don't see how the CC companies are gonna allow us to not pay them for that long while we build up the escrow account. Our company says it's a cat and mouse game that will allow them to negotiate on our behalf. I understand it and can see how it works, but what it the CC companies don't budge much, I haven't payed them in months and now they won't go anywhere near 50% on the dollar, so what happens next. I certainly don't have 80% on the dollar and now I'm months behind on the payments....

Bankruptcy, although it seems that it will hang around longer would be a less messy and more immediate solution. The wife unfornately see it as much more of a "screwing ourselves for the rest of our life" type of thing.

Any more input is greatly appreciated.

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You're correct, the credit card companies are NOT going to sit around while the debt negotiation company piles up the funds. You can and likley WILL get sued and the debt company won't help you, you'll wind up with judgments anyway. Judgments in GA are good for up to 20 years !!

Your wife is incorrect about 'screwing yourself for life' - thats definitely NOT true. You can recover MUCH faster after bankruptcy than you EVER will with the debt company route. Let me try to explain a bit.

First, negatives stay on your credit reports for 7-1/2 years. For that entire time, they will show as negatives and drag down your scores. Collection agencies will continue to come after you and pull your credit and those hard inquiries will also pull your scores down. So, you have a 7-1/2 year battle of scores. While age on negatives does help, as long as there are no more negatives, they will ALWAYS count against you. It will be next to impossible for you to get any kind of credit card and IF you're approved for any type of loan it will be at an insane interest rate for that entire 7-1/2 years.

Second, a settlement on your credit report is a NEGATIVE MARK, it will NOT help your credit UNLESS you negotiate how its reported and I don't think these debt companies do that, all they're interested in is their fees. "Pay for Delete" is even better, but it only works for collection agencies. Original creditors can be very stubborn about changing a delinquent tradeline to 'paid as agreed' or 'paid' instead of 'charge-off' or 'paid for less than full amount'. Do you see what I"m getting at here ??

Now Bankruptcy does stay on your reports for 10 years, BUT, once you do some credit repair post-discharge, do some careful rebuilding and keep your credit sqeakly clean, your credit will be MUCH improved in a LOT less time. You could qualify for an FHA mortgage at good rates 2 years post-discharge. By the time you reach the 4 year mark, you should be able to get decent unsecured cards and other loans.

Once you file for BK, ALL of the previous negative tradelines are essentially negated, they no longer impact your scores (as long as you make sure they're reported right). Once you file, NO collection activities are allowed and once the debts are discharged they can NEVER come after you again and they can NOT pull your credit.

My take on this is its 7-1/2 years with completely BAD credit where you'll have a hard time getting any more credit, vs. 2 - 4 years with a bankruptcy. My sister got a car loan (at a decent rate) and unsecured credit cards at the 4 year mark after her bankruptcy and others can tell you similar stories. Bankruptcy is NOT a 10 year credit death-sentence, as your wife obviously seems to think it is.

Statute of Limitations for legal action to collect a credit card debt in GA is 4 years, but the crapshoot is whether or not you can GET there w/o being sued.

One more thing.. there's NO guarantee that a settlement is the last you'll ever hear about the settled debt. It is common practice to sell the remaining balance to yet another collection agency who will harrass you to pay the REST of the debt - with interest tacked on to boot !!

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Thanks once again. We are not worried about obtaining credit. Even with good credit that we still have (700+ scores) we couldn't afford another payment anyway. So if we do file BK, the extra $1k a month that we don't have to pay will pretty much allow us not to have to finance anything anyway. We are just worried about being sued or having them try to take somethings, just for the sake of having to explain it to our families. Here is what we have.

House - We owe $137k, it appraised for $157k, but that was an inflated rate by the lender just to get us cash back. It would not even sale for $120k to be honest.

Car 1 - Worth about $5000.00, paid for (97 Nissan Altima)

Car 2 - Worth about $16,000.00, we owe about that on it. (2000 Maxima)

Car 3 - Worth about $500.00 (busted transmission)

I'm not up on all the exemptions, etc...anything they can take?

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BK is not just about debt levels but, it's about your income vs expenses which do not include the debt you wish to discharge. You really need to figure out your monthly expenses. Here's a good worksheet to get you started. The problem you may have is too much disposable income for a chapter 7 discharge. [From the comment about about saving a $1K/month by not paying the cc bills}.

MONTHLY EXPENSES Monthly Expenses Debtor Spouse __Both__

Rent or mortgage paid monthly $ $ $

Are real estate taxes included in monthly mortgage payment? __Yes__No __Yes__No *

Is insurance included in monthly mortgage payment? __Yes__No __Yes__No *

Electrictiy $ $ $

Heating Fuel $ $ $

Water & Sewer $ $ $

Telephone $ $ $

Cable television Service $ $ $

Other (specify) $ $ $

Home Repair & upkeep $ $ $

Food $ $ $

Clothing $ $ $

Laundry & dry cleaning $ $ $

Medical & Dental $ $ $

Transportation (do not include car payments) $ $ $

Recreation (newspapers, magazines, entertainment, clubs $ $ $

Charitable contributions (specify) $ $ $

Insurance (not deducted from earnings or included in mortgage) Debtor Spouse __Both__

Homeowners or Renters Insurance $ $ $

Life insurance $ $ $

Auto Insurance $ $ $

Other (specify) $ $ $

Taxes not deducted from wages or included in mortgage (specify) $ $ $

Monthly Installment Payments (not listed above) Debtor Spouse __Both__

Auto- Make/model________________ $ $ $

Auto - Make/model________________ $ $ $

Creditor:______________________Acct#________________ $ $ $

Creditor:______________________Acct#________________ $ $ $

Creditor:______________________Acct#________________ $ $ $

Creditor:______________________Acct#________________ $ $ $

Creditor:______________________Acct#________________ $ $ $

Creditor:______________________Acct#________________ $ $ $

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When we tried the CCCS route, I believe our disposable income was between 600.00 and 800.00 dollars a month. Our two CC bills are about $850.00. The $1,000 a month savings was after paying a few small bills off. I guess a BK attorney would be able to tell us if we qualify.

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Thanks for continuing to reply Bingo/LadyNred. Our main goal would be to cut in half the amount that we are paying to the CC companies. Saving $400 a month and combining that with income tax return would allow us to buy a used car for cash and then sell the expensive car we have now, which would give an extra $550 a month. So then we could save about $1000 a month in whole. So if we could just cut it in half, and believe me I want to pay it back, but with the way the payments are now, it's futile.

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Don't count on keeping tax refunds, not even with a Ch 13. If you can file for CH 7, you'll likely lose that refund for sure. You MIGHT be able to keep in with a Ch 13 but ALL of your disposable income must go into the CH 13 plan.

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