I can’t believe I’m writting this. I finally tallyed up all my outstanding debt. Most of it stems from being laid off a couple of times in the last few years, moving cross country, and changing my lifestyle entirely. It comes to somewhere in the neighborhood of $16,000. Yes I think my wife is a saint for putting up with me about this. But now I need a new car. The sales manager, a great guy, can get me into a 2004 Pontiac Grand Am, but I’m going to get killed on the interest rate. I don’t make enough to make any debt payments right now, so they’re all sitting out there hurting my credit, which is seriously in the toilet. Does it make sense to declare bankruptcy? I really don’t want to. How do I do it? I have no idea what it takes or how long. What will it do to my credit going forward? Can I do it and not lose everything? We need to get a new car, the loaner we’ve been driving has to be returned to my grandparents tomorrow. If we can get the down payment, we can get the new car tomorrow with no payment until the end of June. I just don’t want to screw myself for the future. Please help.
I would recommend getting to a credit counselor. I expect your state has an office. Don’t go to a place where you have to pay for conseling.
I don’t think $16K is that huge a debt - I’m sure you can get your situation resolved and start rebuilding your credit. Good luck to you!
Just to clarify, you want to declare bankruptcy to get rid of your debt, so that you can get a new car?
Sorry, but it doesn’t work that way, and certainly isn’t worth ruining your future credit for the next 7 years, minimum.
As soon as you apply for bankruptcy protection you are not permitted to have any debt during the process (10-11 months). Once your case is heard by bankruptcy court, you are discharged from those debts, but no-one will loan you anything for years afterwards. (Note, I am in Canada, so YMMV).
Personally, I would buy a used car and put the money you would have put into new car payments towards your debt load.
See a credit counsellor - they’re usually free - for other advice.
Have you thought about consolidating your debts into one monthly payment? That is often more manageable.
Good luck … drowning in debt is a horrible, helpless feeling.
It is a used car, but with a wife and kid, I’d prefer a newer used car that has a warranty, just so no one gets stuck. The guy I went to is a specialist. His official title is “very special finance manager”. He actually told me that if I declared bankruptcy, he could get me a better rate a week later than he can get me now. I think this is crazy, but he’s been around a long time and he sells over 40 cars per month to people who are in tough financial positions. And its not that I want to get rid of debt to get more debt. We need a car. To get to work, to get the munchkin to daycare. But I’m not sure how I’m going to do that, pay of debt and continue eating and paying rent. Something has to go. And I’d like to use this as an opportunity to rebuild.
Did he put any of these “promises” in writing?
I’ve used American Consumer Credit Councilling before-you might want to see if they have an affiliated office in your area. You should certainly see someone (who doesn’t have a financial stake in your decision), before you sign anything that will put you further in debt.
You are seeking legal advice, which I cannot give you, as I am not your lawyer, you are not my client. What follows is merely common knowledge and common sense, not legal advice (which I am not giving you).
Bankruptcy laws have changed recently, and not for the benefit of the individual consumer. As a result, there are several things you ought to consider before declaring bankruptcy. I don’t know what they are, or I’d tell you. You might consider rephrasing your question as a hypothetical (i.e., assume a two parent family with an infant, $16K in debt, needs a new car – what are benefits/disadvantages to BK?) and reposting in GQ.
Barring that, I do know who can help you: licensed attorneys with the SF Bar Association’s Lawyer Referral and Information Service. $25 for a half hour consultation with a bankruptcy attorney. Or a similar service by the Oakland Bar Association, which appears to have a free phone consultation. I don’t know if you qualify, but Bay Area Legal Aid may also be able to help you.
Although I cannot give you legal advice, I can and do give you my sympathy. You’re in a tough spot right now. Good luck.
This doesn’t sound right to me. You might be able to get new credit after filing, but I think you would get a worse rate, at least in the short term (keep in mind that I am not a bankruptcy attorney or a credit counselor).
Free advice.com has an entire section devoted to consumer bankruptcy. It may help you get a better understanding of how consumer bankruptcy works and whether you should file.
And I second Czarcasm’s recommendation for debt counseling services. It’s a good idea to have someone else review your financial situation.
Good luck!
Since this is IMHO, let me say that I think it is extremely financially irresponsible to simultaneously be considering buying a $10,000-$14,000 car at a high interest rate and thinking about declaring bankruptcy over $16,000.
My vote is to go get a '95 Honda Civic at one third of that price, which could well be in the neighborhood of a decent downpayment on a new/newish car. Then get AAA road insurance to take care of the wife and kids in the odd event that one of the most reliable cars ever made happens to break down.
For more on the utter foolishness of buying a car when you’re already in financial trouble, see this page about how you’re throwing good money after bad.
Don’t file for bankruptcy over 16k of total debt. Do as several have already suggested and see a free credit counselor.
Since you have day care, I assume yours is a two wage-earner family. 16k debt plus a car shouldn’t be a problem. A counselor will help you sort it all out and set priorities.
Good luck.
Look, don’t be an idiot. Declaring bankruptcy will over the years cost you much more than $16,000. Lost opportunities, higher interest rates on everything, inability to get loans, poor credit, credit card companies saddling you with monstrous interest rates. Trust me, you will pay much much more than $16,000.
And what, you can’t pay off $16,000 in a few years? You can’t put away a few hundred every month to pay down the debt? And you think bankruptcy will make your life EASIER?
If you can’t put a few hundred every month to pay off your debt, you seriously need to re-evaluate your finances…your job, your home, your car, your spending habits, everything, because if you can’t save a few hundred a month your next unexpected financial problem really will bankrupt you.
First off I wish you the best of luck. Debt is no fun, I just spent 4 years paying off a mountian of CC debt.
But…unless you know this car manager personally the chances of him being just a good guy are slim.
His job is to sell you a car. Poor credit just means higher profit. You will pay more and get less for any trade because you have few other choices.
I don’t want to sound unsympathetic but the last thing you need is a new car. If you do the math an older 3K- 6K car would be a much better financial decision. Lower initial outlay, slower deprecation, no need to carry full coverage insurance.
Get a membership with AAA if you are worrying about getting stranded and pay for an extended warranty if you are worried about repairs. To use bankruptcy to discharge a 16K debt to allow the purchase of a 16K deprecating asset with high monthly expenses (insurance, interest) Sounds like a recipe for disaster.
Take that car payment money get to a credit councilor and pay off your old debt.
Then if you must by a car get one a couple of years old that is still under warranty. but don’t finance it for more than three years. If you cant afford to do that then you cant afford a new car. The three year limit is to keep you from getting upside down in the car.
Again good luck,
This thread’s short so far, but I’ll already sound like an echo:
1.) $16K of debt is a ridiculously low amount to be considering as the basis of a bankruptcy;
2.) As recommended above, get some counseling from someone other than one who specializes in selling cars to people in tight situations; I see you are a Member, so you can search out the many threads where people have commented on their experiences with credit counseling organizations (some have negative appraisals to offer of such). An attorney may well be worth a counseling visit as well.
3.) The encouragement part of my reply: I’ve been there, pal, and as Stainz noted, drowning in debt can be a horrible, helpless feeling. I hit $56K in unsecured credit card debt in 1996; I just checked an inflation calculator and that’s ~$68K in today dollars. I resolved to get rid of it. It took six years, and I lived on the bare essentials. I haven’t used a credit card since 1996 and, brother, the feeling of escaping that monster that had been growing in my backyard for years was worth the effort.
Now, I recognize that I don’t know you, or your situation, but your OP does call to mind some of the short term solutions that I did occasionally pursue to stave off the demons for brief periods. And, while this may or may not sit right with your headset, I recognized that all of the debt I’d incurred had been acquired “eyes bright” - i.e., I knew I was taking on debt, so I felt some moral obligation to discharge it responsibly.
I believe you’d be far better off to start looking at what you can do in the long term to settle your debts than you would to take on additional liability to have a car tomorrow.
Good luck, pal!
Go NOW and consolidate your debt.
Actually, first, burn that “great guy’s” business card and NEVER EVER think of him again. He’s a shyster and he’s out to hose you on an interest rate.
You can get loans after declaring bankruptcy. The dozens of offers for ‘buy a new car!!!’ that we get every week prove that, and that his bankruptcy lawyer is offering help in getting a mortgage also proves that.
However, you’ve got a manageable amount of debt, if you have a job and steady income.
Please go to a credit counselor. They will help you figure out what exactly the right move is for you.
Ditto.
If I may interject with a tangential question: how? Speaking for myself, I have applied for numerous debt consolidation loans, and have been turned down for all of them because of…excessive debt.
I’d like to chime in and say why the heck are you thinking about a near brand new car when you are thinking about declaring bankruptcy :smack: . Buy a relaible used car for 4,000 or so and start paying down your debt.
You don’t want a debt consolidation loan, you want one of the company’s that will act as a middleman with all your credit card companies and negotiate a fixed rate and payoff amounts. They work out your finances and help you figure out how much you can afford to pay toward your debt. Usually you pay them and they distribute the money to the cc companies. Often the credit card companies will waive other fees if you are in this program. The catches are that they usually have to take the payment directly from your account and you cannot use your cards anymore or apply for any others while you are in the program. They usually only ask for a small fee/donation if anything at all.
You don’t want a loan, you want a debt consolidation program.
Source: http://www.nolo.com/resource.cfm/catID/462A9501-9B21-4E09-A08C5A7B8AF51A79/213/161/
Bankruptcy Abuse Prevention and Consumer Protection Act of 2005
Ok that sounds great. Do they report negatively to your credit? I’ve heard that some of them negotiate settlement, but don’t pay until you have all the funds in an account with them. Is this true?
If this is true, you won’t be able to make payments on a car either. I’m with Ravenman, you should not be spending a bunch of money to get a “nice” car. Nice, newer cars cost more to buy and cost more to insure. I recently switched from owning a '98 Civic to owning an '84 Mercedes, my insurance went from $200/mo to $60/mo because I don’t need collision or comprehensive on the M/B.
An '04 Grand Am will probably cost you $300+ a month to buy, plus insurance. If you get a car that’s 1/3rd the price of the grand am, that’s $200/mo you can put into paying down your debt, maintaining the car, etc.
I also agree that this salesman is not a great guy, he wants you to file for bankruptcy over $16K of debt so that you can borrow money to buy a $12K car from him.