Forum
|
|
Forum
|
     | Wednesday, January 19, 2000 - 12:36 pm  We owe a large amount of unsecured debt (approx. $50,000)on credit cards only. Credit is OK so far but it is killing us. We can afford to go with CCS for a 5 year payoff, but my question is - should we, or should we file or simply default and start over?
|
| | Wednesday, January 19, 2000 - 01:17 pm File bankruptcy. Any other option (default, CCCS) will ruin your credit.
|
| | Wednesday, January 19, 2000 - 03:35 pm Bankruptcy is better in most cases. But, what you presented isn't a lot of information. What is your income? What are the payments? What borrowing activities are you planning in the next 10 years?
|
| | Thursday, January 20, 2000 - 02:36 am I would go for the BK. My wife was in the same situation. Perfect credit but just too much. The card companies kept raising her intrest rates because of her "profile" even though she had never been late. After researching how long it would take to pay them off and factoring in how MUCH it would cost us (based on their new intrest rates) to pay them off, 7-10 years is nothing. You can still qualify for such things a mortgages (after about 2 years). I caution you though to be sure that you learn from the experience and don't let the feelings of "moral obligation" weigh you down. It is your legal right to file and I would suggest with the new reform laws that are trying to be passed, you do so quickly. Do not even consider a chapter 13, it does not do anything to help your credit standing and only keeps you tied to the Credit card companies. In short, my wife chose to start with a clean slate and is now free from the feelings of fear and stress that her debt caused her. We have learned to live without credit (although I still have a couple of cards for emergancies) and have quite a saving account built up. Good luck
|
| | Thursday, January 20, 2000 - 03:37 am Income is now fairly high 90,000 per year CCS payments would be approx. 1200 per year for 5 years. Would like to buy a house in 5 years. - Sold our home to help with payments and got a free place to live through work will need to buy a car this summer Most of the debt was accrued in order to adopt our children - only had a 2 month window for the adoption.
|
| | Thursday, January 20, 2000 - 04:07 am For the past two years, I have been working two jobs, at times three, in order to pay off credit card debt. I have tons of late payments on my credit report. I am driving a car that is about to die because I can't get any more credit (probably.) It never occurred to me to declare bankruptcy. I guess I just assumed that it was my responsibility to pay these bills since it was me, and nobody else who got me into this situation. I guess I don't understand...why everyone is so quick to tell this person to declare bankruptcy.
|
| | Thursday, January 20, 2000 - 05:46 am File a BK. That will give you 4+ years to rebuild your credit. Typically, these days you need to be 4+ years out of BK to get a "A" paper mortgage. You must then immediately and diligently work towards rebuilding your credit. As soon as you are out of BK, get secured credit cards (at least 3).
|
| | Thursday, January 20, 2000 - 05:51 am With $90,000 per year, it is unlikely that you will be able to file a chapter 7. One of the pre-qualifications is that you not be able to pay those creditors, that you have no "disposable income". Even with children, it is unlikely that you can credibly allege that you have no money left over at the end of the month after paying basic necessities. Maybe you have some wild "necessities"? If you cannot account for nearly $90,000 in basic necessities, the trustee would have the option of objecting to the chapter 7 as being a "bad faith filing". That you have the disposable income to file a chapter 13, and pay at last something to the unsecured creditors over a 3 (or more) year period. I saw a moron "bankruptcy attorney" in court a few months ago. When the trustee asked the debtors at the creditor's meeting why they had not filed the case as a 13 snce they had disposable income, the moron interjected that he had advised them of the different chapters, and that they had chosen the 7. The trustee appropriately responded that it was not their choice. After they left, the trustee shook her head in disgust and said "can you believe that guy?" You might get away with filing a 7 with some disposable income, but it depends on the practices in that district, and which trustee you get. I agree that a 13 is not fun. As to why so many people are recommending bnk, it is because they are aware and onjective enough to recognize bnk for what it is, a financial planning tool which can be wielded quite effectively in the hands of the knowledgeable. It is not always an act of desperation. Ask Tia Carrere, Burt Reynolds, and Wayne Newton, to name a few. It is also something that I frequently recommend against. And, respectfully, they are not all being "quick" to recommend it. Some of the more knowledgeable recognize that more information is needed. I would still need more info to even hazard an opinion.
|
| | Thursday, January 20, 2000 - 08:34 am The person has posted here if bankruptcy is the best solution and, from a credit standpoint, the answer is yes. Simple default is not the best solution and particularly not if the person grosses $90,000 a year. The most likely outcome of that is the person will end up with judgements against him, which stay on their credit profile from 7 years after being paid. Even CCCS would be better than that. CCCS can do nothing for a person that they can't do for themselves and a person's credit profile is frequently ruined by CCCS -- left littered with R7, I7 and CCCS notations everywhere. Comparatively a person who files bankruptcy is frequently able to obtain a 680+ FICO score 2 years after the bankruptcy is discharged. From a credit standpoint, there's no comparison. Obviously the very best solution, from a credit standpoint, is to be financially solvent and to pay all of that off without ever being delinquent.
|
| | Thursday, January 20, 2000 - 10:13 am Kind of funny when the bankruptcy attorney is arguing against bankruptcy. I would need more info before I could be so conclusive. If they have enough disposable income, I have to question whether it might be better to cut a deal directly with the creditors to pay a discount on the total debt. If they can pay it off over 2 years on their own, I would rate that better than bnk. The nature of the debts is relevant. If they are medical, they are less likely than banks to sue and get judgments. What if the debts are business guarantees that don't even show on the credit reports? Keep in mind that based on the limited information provided they may not be able to do a ch 7 that is completed in 4 months. They may have to do a ch 13 and wait 3 to 5 years before they can start rebuilding their credit. Whatever they do, I feel that almost anything is better than paying CCCS for 5 years.
|
| | Thursday, January 20, 2000 - 10:27 am How could Bankrupcy possibly be any better as far as a credit score than just letting them go into charge-off status? If you stop paying everything today, within 6 months they will be charged off, then 7 years later they are gone. So 7 years 6 months from now, your credit is "clean". If you file BK, it stays on your record for 10 years, not to mention must apps as if you have "ever" filed for BK. I guess you could lie and say no after 10 years, but that would be a felony.
|
| | Thursday, January 20, 2000 - 11:37 am Why is the CCS so bad?
|
| | Thursday, January 20, 2000 - 11:51 am What would happen to these guys if they just did not pay the credit card debts?
|
| | Thursday, January 20, 2000 - 12:06 pm I have tried both methods - Bankrupcy and Walking Away - Bankrupcy in 83 and Walking Away in 91. Back in 83 bad credit meant you could not get any credit. I went through 7 years of having to pay cash for everything and not being able to rent a car from major rental companies (I could rent from various "rent-a-wreck" companies after posting a cash deposit - one car left me stranded at work at 3:00 in the morning!!!). When I just let the debts charge off in 91, things were much different. I got a secured credit card from First Consumers National Bank almost immediately. I sent cease-and-desist letters to collectors who wrote, and changed my telephone number to an unlisted one. Since I had the secured Mastercard in my pocket, I pretty much went through the next 7 years as though nothing happend. In 94 I bought a new car from a dealership by putting 30% down and paying a high interest rate, but at least I was able to buy a car. I did have a slight problem getting an apartment in 95 (I had to move), so I had to have my girlfriend "co-sign" the application. Later in 95, I was sued by a collecation agency for over $ 5000.00 for one of the Mastercards I let go bad - I settled for $ 500.00. Today, there is an entire lending industry (called sub-prime) devoted to extending credit to people with bad credit. Bottom line is, today you can get credit after you pull the rip cord. You will pay higher rates, and have to put more money down for new cars, but you will still get the credit. I can't see any reason for someone not to favor pulling the ripcord instead of bankrupcy.
|
| | Thursday, January 20, 2000 - 12:15 pm Won't they garnish wages or something?
|
| | Thursday, January 20, 2000 - 12:21 pm They have to sue and get a judgement before garnishing. You can just beat the suit or convince them that you are "judgement proof". worse case, let them get a judgement then file bankrupcy as a last resort - my guess is that they won't bother suing as that costs money.
|
| | Thursday, January 20, 2000 - 12:24 pm $50,000 is a lot of $$$$. Wouldn't they sue for that much?
|
| | Thursday, January 20, 2000 - 01:58 pm I'm the only person posting on this board who has a personal interest in motivating people to file bankruptcy. And I'm the one who is still not sure what the right answer is in this case. On consensual validation alone, it should make you wonder that so many knowledgeable people (without personal interests) favor bankruptcy. If you do not accept that these people are knowledgable, then you have not read enough posts here. In response to Anonymous @ 3:27 pm, if you wait the 7 years for the adverse information to fall off the credit report, then you will probably have bad credit for all 7 years. I have read that to some creditors, a charge off (R9) is viewed as worse than bankruptcy; it shows a complete refusal to deal with debt. During that 7 year period, you have the appearance of someone who is about to file bnk. Some creditors use a mathematical model which predicts when someone is about to file bnk. Doesn't matter if you never actually do - what matters is your appearance for every day during that 7 year stretch. If you file bnk, then instead of looking like a bomb that could go off at any time, you are a bomb that has already gone off. The new creditor knows that you cannot escape if they lend you money.
|
| | Thursday, January 20, 2000 - 02:17 pm Additionally many lenders, especially mortgage lenders require you to pay your outstanding collection accounts before they will give you a mortgage. If those amounts are discharged through bankruptcy that isn't a problem. The person's different experiences with bankruptcy in 1983 vs. charge off later on has more to do with the year it was in than the method chosen. It is not uncommon for a person to file CH7 BK and to have an excellent risk score 2 years later. I did not know that a person might be compelled to file CH13 instead of 7. I thought anyone could file CH13 up to a certain dollar amount then they were forced into CH11. In many cases a person with delinquencies who files BK has their score improve. It's like Voigtkampff says: The bomb has already exploded.
|
| | Thursday, January 20, 2000 - 04:51 pm Actually there is a limitation on the amount of debt one can have in ch 13. I think that it is something like $250,000 unsecured and $750,000 secured. But ch 11 is a completely different animal. And more difficult. Indicative of the difference in difficulty is the fact that the filing fee for ch 13 is $185, and for ch 11 is around $830. My last office would charge approx $2,000 for a ch 13, but would take a retainer of $20,000 or so for a ch 11. Great variation in the ch 11 attorney fees. I am not disagreeing with Sean that bankruptcy can, and usually is, better than other remedies. I just wanted more info before I give an opinion. Also, like Sean says - a bankruptcy in 1983 is nothing like a bankruptcy now. Now the loan officer that you speak to may him/herself be a fellow bankrupt - since there are 1.5 million NEW bankruptcies per year. As far as the question about what will happen if one doesn't pay, won't they sue for $50,000, and won't they garnish: They can't garnish until they get a judgment. Most creditors never bother to get a judgment. Your total debt does not determine whether or not they sue. More indicative is the amount of debt with each creditor. Then it depends on that creditor's policy. Some are aggressive and others passive. Even after a judgment many do not bother to garnish. Often they are not allowed. Even when allowed, there is a federal limitation. Some people ignore their creditors in hope that they do not sue and then, after the statute of limitations has run, there is no longer a risk of judgment or garnisment. If the creditors do sue, then you can always file bnk then.
|
| | Friday, January 21, 2000 - 01:49 am Also take into consideration that if most of your debt is revolving, chances are you do no have a whole lot to show for it. I think after my wife declared, out of the 50k she declared, our total "assets" was less than 5-6k. 9 times out of 10 they will not even show up for the hearing. A simple warning though, store credit cards (such as Penny's) know what you have bought and might try to reclaim. I am not saying that a BK is a tool to take lightly, it is a very serious situation requiring a great deal of thought and soul searching, but it is your right. You have to ask yourself, is the stress, fear, and heartache worth it; it was not for us. If you feel that it is not, try to find a REPUTABLE attorney. We have learned to live on cash and personally I think we Americans need to stop this endless pursuit of credit. My wife gets about five offers per week for a "secured card" and they get shredded. Just try to remember what got you into to this situation in the first place, and try to learn from it. Save your money for a few years so that you can put a high down payment instead of racking up debt again.
|
| | Friday, January 21, 2000 - 06:24 am Ok, so on Jan 1, 2000 Jack files bankrupcy, while Jill just let's the debts go bad. Sometime around July of 2007, Jill's credit is clean, Jack's will show the bankrupcy for 2 1/2 more years. I don't think anyone could argue that by July of 2007 Jill is better off than Jack? The question is who is better off between Jan 2000 and July 2007? Voig says that Jill will get no credit until the very end because she is a "potential" BK, while Sean says that Jack could have a good score after 2 years after he files. Could you explain how Jacks Credit score could be good 2 years after a bankrupcy - the bad credit remarks will still be on his report, along with the bankrupcy filing - who would give him credit that would not also give her credit? I still believe that neither one would get any real credit to speak of until their bad credit entries went away - Jan 2010 for Jack, Jul 2007 for Jill.
|
| | Friday, January 21, 2000 - 08:26 am Let me ask you this, if you were a bank who would you lend money to, the person who has never declared BK w/ bad credit or the person who declared BK and has no bills to pay and who you know cannot declare BK again for a long time? From what I have seen, a car loan and mortgage are easy to get after a BK (obviously with a higher intrest rate) because there is an asset that can be repoed if payements are not made and they can be sure you probably will not get very much other credit extended and thus have no problem paying the loan.
|
| | Saturday, January 22, 2000 - 01:46 pm I have found this dialog interesting. After accumulating over $35,000 in credit card debt we weighed the idea of Bk and cccs. In my mind cccs was in the long run a more honest way to handle the debt, and we have completely paid off all the cards. Although I fear I may have been misguided. I would think that the fact that we actually paid off all the debts instead of letting them go would look better to future creditors. Now I fear that all we did was make ourselves look like losers. I am trying to find someone to lend me some money to make a bid on a house that I have wanted to buy for over three years and am running into brick walls. It was easier to buy a house with only one of us employed and bringing in half the income, and owing much more money than we do now, than it is with us being debt free and having twice the income than before. I would think that having paid everyone in full, even if it entailed using cccs, would show us to be responsible in trying to do the right thing. Am I crazy, or what?
|
| | Sunday, January 23, 2000 - 08:34 am Seek the motivation of credit "counselors." Who pays their bills? Consider the FHA loan guidelines which state "A bankruptcy (Chapter 7 liquidation) will not disqualify the borrower if at least two years have passed since the bankruptcy was discharged and the borrower has re-established good credit (or has chosen not to incur new credit obligations), and has demonstrated an ability to manage financial affairs." http://www.hudclips.org/sub_nonhud/cgi/nph-brs.cgi?d=HSGH&s1=(4155.1)[no]&op1=AND&l=100&SECT1=TXT_HITS&SECT5=HEHB&u=./hudclips.cgi&p=1&r=4&f=G Stop asking for opinions and get the facts. Petition for relief through bankruptcy. If the judge says it is just, then it is so. Don't second guess the court. If you are a poor credit manager, commit bankruptcy, have the chance to save $500 a month afterwards (who wouldn't like to create a savings account of even half of what they pay on their regular monthly payments?), and the principle only grows to $12,000 in just two years (on which I am sure you can find any number of secured credit card lenders willing to talk to you)-- what in the world are you worried about obtaining more credit for? Ride the bus and read a book. Ride a bike and get healthy. Drive a beater. Stop the insanity.
|
| | Tuesday, January 25, 2000 - 04:12 pm Two years ago, my wife and I had over $50,000 in credit card debt and chose CCCS. It was "Cambridge credit counseling: America's largest non-profit, premier debt-management service" We had something like a 5 year plan originally, but an advantageous career move allowed us to make large additional payments directly to the creditors. We ended up paying off our debt in 2 years. I thought I was so smart and that I did the only "right" thing. I just applied for a new credit card (not that I need one, but just so that I can earn miles), and I was turned down. The letter indicated that Trans Union "did not contain a numerical score".I am worried now that my initial decision to do the right thing may not be l;ooked upon as the right thing by those who make the decisions. After reading some of the postings here, I am beginning to panic. Was I stupid? Should I have instead enlisted the help of some slimeball lawyer in order to wiggle out of debt I knowingly and freely incurred? Okay, the interest on those cards is highway robbery, but I felt obligated to at least pay off the principal--which I did. I am afraid I am stuck. We are currently living overseas and are putting away a lot of cash, but will we be relegated to paying cash for our new house and car when we return to the US? Please give me some feedback. We are planning to buy a house within the next one to 2 years.
|
| | Tuesday, January 25, 2000 - 06:35 pm Ouch.
|
| | Wednesday, January 26, 2000 - 09:15 am Time heals all wounds. If you don't currently have a credit card you should get one. Try either a high-risk card or a secured credit card and give it a couple of years of good payment history. After that ... see what happens.
|
| | Saturday, January 29, 2000 - 08:47 am Just a quick note about CCCS. I went with a friend of mine when she signed up. All of her credit card companies were willing to reduce her interest anywhere from nothing to 5% while she is in the program with the exception of SEARS. Sears refused to lower her interest at all. I believe it was at 21%. She had a couple of bills that would be paid off in a couple of months. The person at CCCS told her that when she paid off those debts the additional monthly payment would be spread evenly over all her debts. My friend also asked if she could occasionally pay extra to pay if off sooner. CCCS said the same thing, it would be spread across all creditors evenly. I asked why don't they put it towards Sears since that has the highest interest rate and would be financially smarter to pay off highest rates first. She said that it wasn't fair. That these other companies lowered the interest rate for her and should not be punished. Sears would benefit because they were unwilling to lower their rates to begin with. This didn't make sense to me from my friends financial standpoint. I totally see where she is going with this but to me it just screamed that they are LOOKING OUT FOR THE CREDITORS, NOT WHAT IS IN YOUR BEST INTEREST.
|
| | Saturday, January 29, 2000 - 09:42 pm Yes, you are right. The CCC's plans are given donations by the creditors to fund the program to help reduce bankruptcies. While it is a good alternative to Bankruptcy the other problem with it is that they (CCC's) do nothing to negotiate a credit rating while negotiating payments. No one is suffering a loss because of your plan so why should you be penalized with 3-5 years of "rolling lates" on your credit for doing the right thing and sticking it out! I use to manage a Credit Union and we went out of our way to suspend the reporting of the accounts while the member was on the plan, it was our way of saying "thanks for not going Bankrupt". If more lenders had this attitude, less Bankruptcies would be filed out of frustration and anger. Kristi Feathers CarreonandAssociates.com
|
| | Sunday, January 30, 2000 - 05:27 am I will say one good thing about the program. Most, if not all of her credit card companies sent her a letter congratulating her on her decision and that once she had completed the program they would reinstate her credit line. I don't know if this is good or bad for her, but at least she would have credit.
|
| | Sunday, January 30, 2000 - 04:03 pm She would possibly/probably have had credit no matter what she did. The last statistic that I read was in 1997, but it stated that 17% of people who file bankruptcy have brand new MAJOR, UNSECURED credit cards within 30 days after the bankruptcy. This is BEFORE people have a chance to update their credit reports!! My personal experience is that it is more than 17%, but I really have my clients focus on credit re-establishment immediately post-petition. By the way I am not promoting bankruptcy, just pointing out that getting credit is not such a big deal. Kristy, I have a question for you, and I started a new topic for it.
|
Credit Forum CreditCourt Forum 2003 Credit Suit CreditFactors Order Credit Reports |