Chapter 7 Bankruptcy

Discussion in 'Community Discussion' started by phas3, Oct 23, 2010.

  1. phas3 macrumors 65816

    Oct 5, 2008
    ....without going into too much detail about my personal life. I'm 23 years old, in debt for over $20-25k. My credit score has plummeted to the very low 500s. I've read about ch 7 bk, sorta like a new leaf but the thing is BK would be in your report for the next 10 years. I'd like to start fresh, I've made some bad decisions in the past, and I 'd like to start getting my financial life in check before it is too late. I have thought of other possiblities like paying off my debt, but even if I pay off my debt, my history report would still show my delinquencies in the past right?

    It's very hard for me to get approved for anything since my credit is so low. So I started looking into ch 7 BK. But I'm not very sure if it's the right move for me, has anyone ever had a similar situation? Or any suggestions etc?
  2. miles01110 macrumors Core


    Jul 24, 2006
    The Ivory Tower (I'm not coming down)
  3. phas3 thread starter macrumors 65816

    Oct 5, 2008
    no I do not, but I do go to school and the gov pays me while I'm going to school (former military). So if I were to start some type of payment plan for my charged off debt, I can start that. But its going to take longer than 6 months to completely pay off 25k in debt. I have a 15k charge off, and I tried talking to the collection agency who's holding the case and they say that they can agree on a pay out and instead of 15k it's gonna be 8k.

    SO I thought that's reasonable so I asked how much a month it would take, and they say 2300 a month for 3 months. I was like whoa I can't do that, and they said that the lowest they could go would be I opted not to go with it. And now it just sits on my credit report history acquiring dilinquencies every month.

    I'm not leaning more towards the BK but, I'm trying to rationalize the pros and cons of going with the BK or paying off the debt.
  4. -aggie- macrumors P6


    Jun 19, 2009
    Where bunnies are welcome.
    No, don’t do the deal with the collectors. Your account was charged off. The collectors are just trying to see what they can get from you. Collectors, right up there with lawyers, AFAIC.

    Go to a consumer credit counseling service in your area. They’re non-profit and can help to set up “reasonable” payment plans to get out of debt. The collectors, like I said, could care less about being reasonable. They get paid for how much they collect, and the faster they can get it, the faster they get paid. They’re usually all on commission.

    Also, your debt is nothing compared to what some have. You can get over this.

    If, you still want to go Chapter 7, be aware that you won’t be able to just go to a lawyer and file. The laws changed, and it is much more difficult to file (you have to go thru counseling and some other stuff, IIRC). Also, it will be on your CR for 10 years. THAT will affect you.
  5. fcortese macrumors demi-god


    Apr 3, 2010
    Big Sky country
    Is the debt all in one account or several? If you plan on pay off the debt, the advice is always to pay off the card/debt with the highest interest first. I agree with aggie, you definitelyneed to check the bankruptcy laws to see what you can do, if you qualify and what the consequences are. Bankruptcy does nothing for the credit score which may be more in the toilet after BK than it is now. Good luck and I hope this helps. Oh, if you are retired military have you thought about any military loan options, military credit unions, etc. Maybe you could secure a low interest loan from them to pay off your debt with a structured and reasonable monthly pay back over time.
  6. Rodimus Prime macrumors G4

    Rodimus Prime

    Oct 9, 2006
    6 months is not exactly a long time to pay off debt and 25k like others have said is not very much debt.
  7. phas3 thread starter macrumors 65816

    Oct 5, 2008
    My debt is in several accounts. I've read a bit of BK ch 7. Cliff Notes are pretty much:

    - After filing for chapter 7, your credit history is wiped clean.
    - BK will be in your credit history for 10 years.
    - BK can bring down your credit score lower, but if it is already low it won't make much of a difference.
    - A couple months after the BK has been completed, you can start working on your credit once again.

    With everything wiped clean from your credit history besides the fact that you have a bankruptcy on file, you begin on a clean slate, no debt and can rebuild credit.

    If I decide to pay off my debt of 25k and not do BK. I believe it will take more than 6 months(it 6 months to get BK completed). Even if I pay 1k every month, its going to take me 25 months to finish. That means I would need to live like I'm barely making money. The gov gives me 1950 for going to school and I also get 600 for disabilities.

    So that's 2550

    - 1000 rent
    - 100 Phone Bills
    - 100-200 for groceries
    - 65 - Electricity
    - 50 - Insurance

    = 1235
    - 1000 (for paying off debt)

    Leaves me with 235 every month and doing this for 21 months. Its doable, but what about unforeseen events? Accidents, etc...?

    Even if I do 500 a month for debt, and it leaves me left with 735 every month which is a bit better but will take me 50 months to get rid of this debt. And delinquencies stay on your credit history for 7 years I believe
  8. fcortese macrumors demi-god


    Apr 3, 2010
    Big Sky country
    Any chance for further government/post-military assistance? It is a tough decision you've got to make and I do not envy you. Good luck in whatever course you choose. You are doing the right thing in trying to get your debt taken care of.
  9. kellen macrumors 68020


    Aug 11, 2006
    Seattle, WA
    Also look at why this happened. BK may be a waste now if you get back into trouble in 3 years again.

    I would want to pay it off.
  10. phas3 thread starter macrumors 65816

    Oct 5, 2008
    that is true, if I go back to my old ways, but this has been a wake up call for me. Being in debt w/ bad credit is really a pain in the ass, and so many people suffer from this type of financial instability and it's hard to get back on your feet. I've got this opportunity to set my future in motion. Just need to figure out what's best to do.
  11. QuarterSwede macrumors G3


    Oct 1, 2005
    Colorado Springs, CO
    If you haven't checked out Dave Ramsey you should. This guy is a genius when it comes to getting out of debt and how to live on a budget. He also has a radio show which takes callers.

    From what I remember correctly he says declaring bankruptcy should only be used as a last resort. You're almost always better off paying off your debt.
  12. phas3 thread starter macrumors 65816

    Oct 5, 2008

    thank you for this! I'm checking the site now
  13. Mord macrumors G4


    Aug 24, 2003
    I wish I had that much money spare at the end of every month :/

    You clearly need to learn to economise, bankruptcy is not an appropriate response to that level of debt.
  14. Sideonecincy macrumors 6502

    Sep 29, 2003
    Came in here to say this. Dave Ramsey is the man. I listen to his radio show all the time.

    Not sure what sort of loans they are, but from what I remember, if they are student loans then they aren't bankruptable.

    I understand that you are a full-time student, but why don't you get a part-time job? If you would end up calling Dave Ramsey and told him that you were a full-time student with no job then he would tell you to get one. I completely understand that going to school full-time is like a job on itself, but tons of college students have jobs. I worked 2 jobs during college and went to school full-time while still making honors. It sucks and your social life suffers, but thats life.
  15. wwooden macrumors 68000


    Jul 26, 2004
    Burlington, VT
    I would also recommend listening to Dave Ramsey. He does a radio show everyday where people call in and ask him for similar advice. I listen to his podcast everyday on my drive to work.

    One of the big questions you have to ask yourself: have your money habits changed? Have you learned from your mistakes? The worst thing you could do is file the BK and not learn and be back in the same position in a few years. I'd really recommend paying off the debt yourself. You'll be that much more motivated to never get close to a situation like that again after seeing how hard it is to get back. Can you work an additional part time job to get in money? Sell some stuff? Move to a cheaper apartment? Get a roommate? These are all things Dave Ramsey is going to suggest. You need to get fired up and do everything you can to get rid of the debt. I bet if you focused, you could have it all done in 12 months. If you start listening to his radio show, you'll realize 25k is very do-able within 12-18 months. Many people who call in to his show have over 100k in debt and get it done in 3-4 years, or less.

    Good luck.
  16. rhett7660 macrumors G4


    Jan 9, 2008
    Sunny, Southern California
    You list 1000 for rent. Any chance of cutting that down to say 500-600? Pay it off.
  17. Mac'nCheese macrumors 68040


    Feb 9, 2010
    Here's my 2 cents: avoid bankruptcy at all costs (pun intended). I know personally how hard it is to get that off of your record and return to normal life. My aunt did it and even years later, when both her and her husband had good stable jobs, a bunch of money from her mom's will and no new debt... she still couldn't get a mortgage that they could have afforded on just one of the two salaries. My own story... I didn't even file for BR. I did one of those mortgage renegotiation deals with my mortgage company. For three months, UNDER THEIR INSTRUCTION, I just paid half the mortgage while we worked out new terms. They told me that, by law, it had to go on my credit report that I was only paying half for 90 days. Anyway, two years later, never missing a payment on anything,working out a new mortgage and slowly paying down all credit card debt to under 10K (barely using them for new debt, always paying more a month then spending) and will me and my wife working full time, in good-paying jobs... we can't get a loan for anything. No new credit cards for a lower rate or just for one vacation, no car loans, nothing. Because of those three months when we paid half under the plan agreed to my our mortgage company. So trust me, even if it takes years longer, you will feel better about doing the right thing and paying what you owe AND you will have a better credit report for when you do need help buying a home or a car or anything.
  18. phas3 thread starter macrumors 65816

    Oct 5, 2008
    With everyone's input here, I've decided that BK is not worth it right now. I started a new thread. I'm going to look for a job to add to my current income and that will help me get out of the debt I am in. So if some of you guys can chime in in the "california job search" thread, I'd appreciate it. Thanks to all your input guys.

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