Bankruptcy - More confused than ever - help!

Hi........sounds like you DO have alot of debt. Opionion?...........find out about the Bankruptcy laws in the state, where you live. Seems like the 'only way out'..the way you describe everything. Yes....it IS a negative item, on your Credit Report. But,..on the other hand, look at it in a 'positive' manner........you owe NOTHING!! I know there is a Chapter 7 Bankruptcy and a Chapter13 Bankruptcy. One..( I believer) you can 'pick' what you want to pay on ( secured loans,etc.). The other you have everything 'liquidated'. I don't remember which one is which, though. Bankruptcy, in my opionion, sounds like it's your 'best bet'.

I don't mean this to sound condescending in any way, but on the topic of bankruptcy (as opposed to credit counseling or debt consolidation, etc.), it is important to be cautious in whose advice you take because bankruptcy laws are complicated.

By sdchargers response, I know he/she is not an attorney and the information provided is inaccurate. Bankruptcy laws are federal laws not states laws, so you wouldn't look to your state laws for guidance. You do not pick which chapter you file under, many variables contribute to which one is appropriate for your situation. You likely will owe something, bankruptcy can wipe out a good number of debts, but may not wipe out all debts, depending on what chapter bankruptcy is filed. Bankruptcy may also not wipe out the amount of debts you assume it will. When Bankruptcy laws were amended 2 years ago (many believe to the detriment of consumers) and several things changed, so many people speak about filing bankruptcy as it used to be and now how it is currently. You could file bankruptcy and still have creditors to pay. So to say you owe nothing is not accurate in many cases. It all depends on the specifics variables of your particular situation.

Make sure you, whatever you decide, that you go into the situation with your eyes wide open, completely educated and based entirely upon your individual situation.

Chapter 7 wipes out everything, chapter 13 lets you keep some things, they put you in a 3 to 5 year payment plan, but you really should register for a free consultation using the button on the right side of your screen if you haven't already.

I know that things seem bleak now but they won't always feel that way. Unfortunately because of health reasons and a failed business my husband and I filed a chapter 7 3 years ag, we were $300,000 in the crapper. We were lucky and got to keep our house. We just refinanced our house earlier this year to a fantastic fixed interest rate.

ladybug

Ladybug, what you stated is true for your experience 3 years ago, but in late 2005, Bankruptcy laws were drastically amended. So, Chapter 7, which never wiped out everything (that is a common misconception), may and likely does wipe out less debt than it did prior to 2005.

Some debts that are almost never ever discharged are taxes, student loans, child support and alimony. Also, under most mortgages and car loans are excluded from debts being wiped out.

Like I said, people are giving accurate accounts of what they went through. But keep in mind 2 things -

1) Everyone's situation is not exactly the same no matter how similar things may sound.

2) Bankruptcy laws changed in late 2005 to the detriment of the consumer (and the joy of the creditors), so many people who have been through bankruptcy may be giving you information that was pertinent before that time but may be inaccurate now that the laws have changed.

HTH

My apologizies you are correct. They have changed drastically and you are correct in saying that it is joy to the creditors.

This explains why there was such a race to bk court at the end of that year before the new laws went into effect.

I wonder, do they still make you sign an affirmation agreement on your secured debts for like your house or car or was that in the prior years of the bk's filings?

ladybug

I am not a fan of bankruptcy especially with the new laws. As I understand the new laws you basically end up protected from creditors for a time period but you still end up paying a portion of them. The worst thing about bankruptcy is it leaves a big black mark on your name for life. Just think about every application you fill out how most of them ask if you ever filed bankruptcy. You would have to either answer yes or lie on the application if you wanted to put no even if you filed 20 years prior to filling out that application. The next thing you must consider is a bankruptcy attorney only makes money if you declare bankruptcy so it is in their agenda to do their best to convince you to declare.

If I remember correctly you already have a home mortgage but no equity. Basically that means you are not on the market for a loan anytime soon which means if your credit takes a beating it will not affect your current lifestyle and a creditor can not go after equity in your home.

I would continue to settle with the creditors that will work with you for a settlement of 50% or less of the original credit limit if they contact you via an attorney. I would not bother dealing with collectors because they can not do anything but hound you on the phone unless they will settle. Your best bet is to disconect your phone and send out cease and desist letters to make them contact you via mail.

The three problems I see with this method are first you have to mentally deal with the creditors which can take a toll on you for a longer period of time than you would with bankruptcy. Next, you might end up with a lein on your home. Third and worst case scenario if you take this route is some may sue for judgment if you can not agree on a settlement. If they sue you may end up having to pay additional fees and penalties that would normally be settled out. The problem is they would not have a good way to collect other than a garnishment. Check your state laws but I think you can only be garnished by one company at a time and the amount would be set by the court but not to exceed 25% of your net income per month. If you present a budget to the court I am sure you could lower that amount depending on your circumstances. The court will not force you to be late on your current payments like your mortgage and other liabilitys you might have. Basically what this means is one creditor might end up with a garnishment for $100 a month or something while the rest get nothing, settle to your terms or let the SOL expire. At $100 a month it would take citibank 12 years to get their money not including additional interest and fees. That means the rest would not be able to garnish for 12 years.

Before making a decision I would also see another attorney. I understand they only make their money if you file but you can get additional info. It is my understanding of the new bankruptcy laws that some of it is determined by your current income. Filing Chapter 13 is also an outlet..there you make one payment to the court and the court pays the debts. They usually reduced agreed upon during the court hearing. You are young...so even though this is a black mark on your credit...your credit is being damaged now by such heavy debt and late payments if any, correct? Yes it is on your record for 10 years but after thatit is not used against you...My ex filed after our divorce and 5 years later bought a beatiful condo..his credit is great now and he has never had a problem getting more credit afterward. Way all your options and make the smartest decision for you at this point in your life.

Yes it is true that bankruptcy affects your credit, but by the time you think of filing bankruptcy your credit is already marred. It stays in your report till 7 to 10 years. But its effect starts diminishing from the day the case gets closed. you can consult an attorney regarding what kind of bankruptcy you should file.

Take care
Nelly

With the new BK laws you can no longer decide which chapter to file. You are given a means test and that decides what chapter you are eligible to file. Your actual expenses do not come into play, they go off the median expenses for your area from the census bureau. The only way you can file a chapter 7 bk is if your income is under the median income for your area, and you pass the means test. Otherwise you will have to file chapter 13, in which you will end up paying back your debts through the courts. Usually you end up paying back 60% to 85% of the debts you owe. The bad thing is I heard on the radio the other day that since the new bk laws passed, something like 75% of all chapter 13's end up failing . . . .

Go to this thread and find out the new BK laws in effect. After giving the means test, it will be figured out whether you qualify for the debts to be discharged or you will be able to pay under a chapter 13 plan.

Many who use chapter 13 are deep in the hole with taxes. The advantage of this plan is that taxes can be included, and the interest rates on them frozen.

Thank you to all of you for your advice. I do currently have a creditor's attorney who will not budge. I answered the summons denying all counts, really just to give myself more time. Within a week he responded with an interrogatory. So, he obviously came to play.

I am really concerned about having a lien placed on my house, which is really all I can see at this point I have to lose. BK would save me this from what I gather.

As far as credit, it is as bad as it can get. All accounts have been in collections/written off since I was divorced, which is almost 2 years now. My rating is below 500. All that saves me is that my mortgage and student loans are made on time. Thereby, I think BK could help it after a few years.

I just need to start over I guess. Emotionally this couldn't possibly get any worse. I do feel morally obligated to repay my debts, but I just cannot get creditors to work with me. Now that my largest one is with this attorney, I am afraid it could get worse. I am young, yes, but I do want to move on with my life with my new wife. We would like to have children soon and I do not want this hanging over me, chasing creditors, having them chase me, etc.

Because I am self-employed and because of my debt load, I am sure I would pass a means test. I haven't even factored student loans into my debt; that would bring it in excess of 100k.

My next step is to get a second opinion. There is an attorney in my area who puts himself out as specializing in bankruptcy and is a former Chapter 7 trustee. I am anxious to see what he says.

Thank you again. I feel a little less alone coming here.

Students loans are not dischargable in bankruptcy.

And just be sure to explore all your options first. A bankruptcy attorney doesn't get paid unless you decide to file, so they are not given you unbiased information.

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Hehe. I suppose you could conviently forget. I doubt it would ever affect you if they found out after the fact but it just stinks to be forced into answering that question every time you apply for anything.