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In Over My Head


JulieG828
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I've been reading this board for the past couple days and I'm looking for some insight specific to my situation.

I've got about $36,000 in unsecured debt and I've been making minimum payments by the skin of my teeth. I had considered going into a DMP after the first of the year but I feel I can deal with this myself (just a little unsure how to proceed). To top things off, I just got laid off on Friday.

I'm on time with all of my payments except for an occasional day or two late over the past couple years. Here's a quick rundown of my CC's: Bank of America - $3800 (10% interest), Citibank - $10,000 (23% on purchases, 32% on cash advances I took), Discover - $3,200 (18% interest), Eastern Bank $3600 (13% interest), Chase - $10,000 (15% interest with a hardship program), Target - $500 (27% interest). I also have a medical loan for $6700 with 13% interest and an outstanding ambulance bill for $900.

I pay minimums on all these which come to about $950 a month. Before I got laid off I only made $1000 a month so needless to say, I've been using some of these cards to make up the difference.

My questions at this point are: Do I hold off payment until they're 60-90 days overdue and try to settle, socking money away the whole time? Do I contact each company and try to make arrangements? I had done that last year with Chase and the best they would do is give me 15% interest which only lowered my monthly payment by about $20.

I have no assets but a 10 year old car and for the moment no income. I'm at a loss as to what to do. I've always been financially responsible but the past couple years I've dealt with inability to work steadily from illness and family situations. Any help would be appreciated.

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If you have no income, a debt management company is not going to take you, at least a legit one.

I like the idea of socking your money away and trying to settle - but will you be able to save enough to pay at least 50% of the debt over 3-6 months after you make a deal?

Kristy

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Yeah, after reading this site, I've pretty much given up on the DMP. Not sure I trust em! lol

That's the iffy part: saving up 50%. I'll be filing for unemployment this week (which isn't much, I know) and working my butt off to get a job ASAP. I know too that the 3-6 month payment timeframe is going to come after about 3 months of holding off payment so that gives me 6-9 months to come up with the cash.

If I'm unable to get the 50% then bankruptcy is my only option right? My fiance is willing to help me as much as he can financially in getting the 50% together but if it's not enough at the end I'm not sure what else I can do.

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Remember if you choose bankruptcy, be sure to read the information on the new bankruptcy laws. One of the requirements is six months of credit counseling through an approved site before filing. This information is provided on the main page of this site. :)++

Yeah, I've researched bankruptcy. I think it's my only option. And you don't need to have "six months of credit counseling". You need to take a certified credit counseling course within the six months prior to filing.

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Yeah, I've researched bankruptcy. I think it's my only option. And you don't need to have "six months of credit counseling". You need to take a certified credit counseling course within the six months prior to filing.

I'm no expert, but unless you're able to negotiate the terms for a positive TL on your settlements, you're darn near better off filing bankrupty as having a number of settlements w/ collections, lates, etc will be every bit as bad as bankruptcy, plus you're $20k ahead in cash at least.

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I want to second the motion that you seriously think about bankruptcy. If you only made $1000 a month previously, you can easily file for Chapter 7.

The idea of declaring bankruptcy is scary to many people, and it's healthy to feel some resistance to it. But if you're concerned about your ability to pay off your creditors, bankruptcy may be the most responsible choice you can make. You won't have a credit record full of derogatory marks, you'll be free of debt and able to start saving for your future, you'll be able to focus on your health and your family, and your creditors will be able to move on as well, instead of spending more money in a futile effort to obtain payment.

Declaring bankruptcy today does not mean your life is over. Without bad marks on your credit report, in a few years lenders will be willing to lend to you again.

I haven't gone through it myself, but I wish I'd been smart enough in my own situation to seize the right moment and declare BK in the past, rather than spend years with bad credit, collections calls and letters, and lawsuits. You'll know better than anyone whether the debt load you have has become too big to manage anymore. If you feel it has, look seriously at declaring bankruptcy, and declaring it early, before you're hit with negative marks on your credit record.

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Thanks to ForgoP and Optimus for your advice. I'm going to look for an attorney in the next week. There are a couple in my area and it's alot easier and cheaper to save up $900-$1500 for a bankruptcy filing and attorney fees than saving up $16000 for settlements. I feel alot better knowing there is a light at the end of this tunnel.

Thanks again.

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Thanks to ForgoP and Optimus for your advice. I'm going to look for an attorney in the next week. There are a couple in my area and it's alot easier and cheaper to save up $900-$1500 for a bankruptcy filing and attorney fees than saving up $16000 for settlements. I feel alot better knowing there is a light at the end of this tunnel.

Thanks again.

$16k+ all kinds of negatives on your credit report. You'll be able to obtain credit EASIER with a bankruptcy and 10 settlement trade lines. After all, with a bankruptcy on your report, they know you can't file for another 7 years. Someone with all kinds of settlements, collections, lates, etc. can easily just file banktrupty and wipe away all of it.

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After all, with a bankruptcy on your report, they know you can't file for another 7 years. Someone with all kinds of settlements, collections, lates, etc. can easily just file banktrupty and wipe away all of it.

Very true. I'm hearing stories now of people that actually got mortgages within a couple years of filing bankruptcy. They're more likely to extend credit since they know you can't file again for a while and because they know you have no outstanding debt! Sounds crazy but whatever works!

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Julie,

With no income, no assets and all unsecured debt bankruptcy is not just your best solution, it is your ONLY solution. Bankruptcy will wipe the slate clean and allow you to start over.

The problem I see is that although BK will eliminate your current debt, based on your comments, it will not cure the problem and prevent future debt.

I am not going to tell you what to do, but please consider this. Subtract your current unsecured balance from your unsecured balance 12 months ago. The result, minus interest and fees, is your average monthly deficit spending, i.e. your monthly living expenses. Your net take home pay needs to be at least this amount in order to avoid future debt. You also need to establish an adequate cash reserve and be able to afford health insurance in order to avoid future financial difficulty. In addition, you really need to begin saving for a car and have the ability to contribute to an IRA.

What I suggest is that you stop paying all unsecured debt immediately and save for a good BK attorney. Start a job search in earnest and be certain that you will earn at least the amount you need (as calculated above) before you file. Otherwise, you will be borrowing again and back into financial difficulty shortly after BK.

Best wishes and good luck. Better days are coming soon.

Cash Flow Coach

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