I suppose different programs work different ways. The one I had took automatic payments and then redistributed them to the cc companies. As the lower card debts get paid off the amount set aside for that card would be put toward one of the higher cards making it easier to pay them off sooner. It wasn’t a “settlement” so much as a payment agreement. I was told that being in the program would look favorable on a credit report, however you cannot be tryingto get more cards or loans while in the program. If you absolutely need a new car or something else then you need to speak with one of the counselors with the program first.
Unfortunately, I had a period of illness that led to me getting behind in my mortgage and ended up with me having to declare bankruptcy when I ran out of other options. So I can’t tell you how it works out after you complete the program.
In hindsight I would have done some other things to keep from getting behind like call the program and ask for a hold on my payments so I could catch up on my mortgage, I think they would have done that, but I wasn’t thinking too clearly at the time.
Disclaimers and all that - I am not a financial advisor, this is all based on my own debt experience and credit troubles. When my husband and I were first starting out with a lot of debt we went to a credit union and got a consolidation loan from them. His credit was terrible - about 5 accounts in collections and late on everything, and we needed a co-signer because of it (even though my credit was fine), but it helped out a lot to make one payment. Then we lived cheaply and put every dime toward that loan to pay it off. We payed off $10,000 in less than 3 years and our combined income was only about $35,000 at the time. You have a baby so it might take longer (I have a new one too so I know how they can use the money!) but I really think bankruptcy is probably not needed here.
If you cannot get a loan at all then just start by calling your credit companies and see if you can get a lower interest rate on any of them. Sometimes credit companies will also let you settle with them if they think you are going to declare bankruptcy - call up and offer a settlement payment, say if you owe $3000 then offer $1000. Say it is the best you can do, or you may have to declare bankruptcy. They might be willing to help you, but if you do make an offer they may demand a lump sum payment up front.
The next thing to do is start paying on the loan or credit card with the smallest balance. Some say the highest interest rate, but I think the psychological effect of seeing an account paid off is better. Put all your extra money on it each month. When it is paid off, put that money that was going toward it on the next smallest balance, etc. It is a snowball effect that will get your debt paid off. By the time you get to the last debts you will have all those monthly payments added up going toward it. If your credit is already shot I wouldn’t worry too much about being late with the other ones any more, the only way to fix your credit now is to get them paid off and then wait. It surely will not hurt your credit more than bankruptcy. My husband’s credit is almost fixed now 6 years later.
Money goes in this order - food, shelter, utilities, debt. If you must get a car now get a used one. I have a baby and I drive an 8 year old car, it is safe. I think the car companies are preying on people’s fears about safety. People get over worried about the ticking time bomb that they think a used car is going to be. I want to throw things at the tv when I see those stupid OnStar commercials that basically say you don’t love your children if you don’t have OnStar (the ones that say what if the car is hijacked with baby brother in the backseat, huh? What then?) but that is off topic. I have a cell phone and the one time my car broke down I was fine sitting around for a few minutes until someone came to get me. New cars can break down too. I agree with the Civic suggestion, those are reliable cars. I personally think car payments are some of the biggest money pits ever (except maybe boats). I understand if you cannot pay even a few thousand up front on a car, but you can get a little loan for a $4000 car and pay it off in a year. My first married car purchase was a $2500 Buick Regal, very good car. Yes, I did need a loan for it but they payments were low and I paid it off in a year. Plus the insurance was cheap.
/concurs with the consensus.
Obligatory disclaimer: I am not your attorney. If you have specific legal questions, contact your attorney.
First, $16K isn’t a tremendous amount of debt (relatively speaking of course). Keep in mind that, depending on what KIND of debt it is, there’s a moderate chance that going into bankruptcy won’t even discharge it. There are a number of common types of debt that are NOT discharged via bankruptcy - such as student loans, tax debt, alimony, child support, etc. Which means that you can file, complete your bankruptcy proceeding and STILL owe those debt, plus accrued interest. Depending on your situation you might come out worse than before, with the added bonus of a bankruptcy on your credit.
It is also worth keeping in mind that your creditors with collateral (home mortgage, car payments, etc) will almost surely be entitled to view a bankruptcy as a breach of contract enabling them to seize their collateral. Most secured credit transactions are arranged that way. This is not to say they WILL, but they probably CAN - and can also use the breach to basically dictate changes in the agreement to you, such as a higher interest rate, bigger monthly payments, etc. Also, if you declare bankruptcy and have certain assets (in some cases including a paid for car, or a paid for house, or personal property in excess of certain threshholds), they will be taken and sold to pay your creditors. Unless you’re renting, carless, and already pretty much living hand-to-mouth, you might want to avoid filing bankruptcy unless you’re driven to it.
Definitely speak to a credit counselor. Your state government probably has some they will recommend. Try for one that’s not-for-profit and who does not demand a consultation fee up front. If you speak to a bankruptcy attorney, be SURE that they’re YOUR attorney - as opposed to being interested in being the trustee of the bankruptcy estate (a position that will end up paying them fairly well, considering). Ask them questions like what percentage of their clients ACTUALLY file. If that percentage is over half, think hard about employing their services.
Don’t think twice about filing bankruptcy - think a hundred times, and then reconsider again.
Erm I wasn’t clear:
When I said “think hard about employing their services”, I meant in the “They may well be crooks, so run fast and far” sort of sense.
That’ll teach me not to use preview!
You’ve already heard many times above that you shouldn’t be thinking about a new car when you’re in this state. (and yes, 2004 is a new car).
But what I’m concerned about is that this doesn’t occur to you. There’s no nice way to put this, but you need to reconsider your spending priorities.
I suggest you relook at everything you pay for right now that you consider mandatory. If you consider a new car mandatory, I can’t help but wonder how many other luxuries you have that you really can’t afford.
List every penny you spend for a month, and then imagine that you have to cut 20% of it. What will you cut? Can you move to a cheaper home? Can you cut down eating out? Do you have extended cable? Look at everything. How can you cut unnecessary spending?
$16k may seem like the end of the world, but it’s really not that bad if you chip away at a little at a time.
Most importantly, even after you get out from under this $16k, you need to think this way. You should be saving every month, not over-spending.
He already contacted a few agencies. The amount he would have to pay monthly in order to settle debts within 5 years is not affordable. From what we’ve been told, if you can’t do it within 5 years, BK is a better option.
Not a preferred or fun option, though.
We need a reliable car. We currently have, uh, none. This car is actually a fantastic deal, and we’re not going to pay $10k or more for an earlier model car with higher mileage. Nothing is cheaper than Hayward, we don’t eat out, don’t watch TV, and don’t go out anywhere that costs more than $5. We don’t have credit cards, either.
I am currently looking for a full-time position, but until then we are living on a single income as a family.
This is not about luxury spending. This is about fallout from 9/11 when DLG was working as a stock broker and investement counselor in NYC, combined with now living in the Bay Area, combined with a crappy economy. Most of the debt here is medical bills from uninsured times.
inkleberry wrote
I’m not sure what “a fantastic deal” is, but I find it very hard to believe that you can afford it right now. You’re telling me that whatever price you’re being asked for this car is less than say $5k, which you could get a reasonable car for?
If the answer is “no”, then you can’t afford it. I’m sorry to be so blunt, but that’s what that is. You can’t rationally buy an expensive car with the kind of debt you have. I’ve had no money, and I know how bad it sucks, but you can’t spend money when you don’t have it.
This is good.
If in fact that is true, then there’s no logical reason you need to even consider bankruptcy.
Because if this is true (that the big problem is that you had some bad luck that put you in debt, but now you’re past that), then it’s a simple matter of putting away a little every month and paying it down until it’s gone.
But everything that’s been said so far does not back this up. Everything so far indicates that you’re no paying this debt down, and that you’re not saving any money. Am I wrong? Are you paying down this debt? Are you saving? If so, then just stick it out, and everything will get better with time.
But if you’re not paying it down, the problem isn’t the past, it’s what you’re doing right now. You can’t afford how you’re living.
Again, sorry to be so blunt. I honestly want what’s best for you.
DLG, you do not need a newish car. Saddling yourself with more debt is not good. Get yourself a banger or a second-hand moped.
Further, can you move to somewhere cheaper?
People who spend too much never think it is. As a general rule, people who are overextended always think they are not luxury spending, that they are just living like everyone else. They don’t add up the $4.00 daily trip to Starbucks, the $70 monthly cable bill, hell, the $15.00 yearly Straight Dope fee.
I’m not saying you are in this category, because I don’t know you, just making a more general point.
Don’t think I mentioned this in my earlier post, but I declared bankruptcy in 1998, and got discharged in '99. It still haunts me financially and although I truly had no other options at the time, I wouldn’t ever recommend doing it without a TON of serious thought and exploring every other possible option.
The only credit I’ve been able to get even though I have a great, full-time job that I’ve been at for over 5 years, has been: a) a secured credit card - I gave them $100 and they gave me a credit limit of $200 with brutally high interest and monthly fees, but I needed it to start rebuilding my credit history, and b) wait for it … I could’ve gotten a CAR LOAN at exorbitant rates from a private loan company.
The fact that these people were willing to loan me money when no-one else, not a gas company, not a department store, not even my own bank … made me REALLY look at the details and the fine print and thank Og I was smart enough to turn my back on it and put up with my POS (piece of sh*t) car for a while longer.
Bankruptcy sucks man, and anyone who tries to tell you it’s no big deal, and it’s the solution to all your woes, is a liar.
Several years ago, I had amassed 26,000 in credit card debt and the payments were killing me. I had to decide whether to declare bankruptcy or go into debt management.
I chose to go into debt management. Mostly because I couldn’t shake the realization that I spent the money…and I owed the money.
Took me 4 + years, but I paid it all back. I have never regretted my decision.
Debt management is a great thing. http://www.cccsintl.org/
Medical bills? Hmmm. Sometimes, you can call the agencies involved and ask to have your bills looked at by the account managers. If you explain you would like to pay your bills, but are having some problems, they will help you. They think that you paying them SOME money is better than NO money. If you file for Bankruptcy they get none.
As far as like after fileling, it’s diffrent for everyone. A person I know (who shall be unnamed) filed in '98. They now own a home at a resonable intrest rate, have two credit cards with high limits, low intrest rates and unsecured. They never would have been able to do this without filing. Before, they were drowning in debt from moves, natural disasters and medical bills.
Explore all your options carefully. Anyway you look at it, you have a long haul in front of you.
I agree with everyone in front who has said to reconsider what you are contemplating.
In addition, I would suggest asking the guy getting you the fantastic deal on the 2004 car to get you the same fantastic deal on a 2000 car, or maybe a 1998 model.
If he says that he can only get you the deal on the “new” car, then run away. They give you a loan on a new car because they plan on you defaulting on the loan. When you do and they repossess the car they can sell it to the next person with bad credit who comes along. This rotation doesn’t work well with older cars, so they won’t finance you for an older car. (This info is from a casual acquaintance who sells used cars).
Also, have you done the actual math on the loan? I know this is basic stuff, but don’t be swayed by “monthly payments”. Look at the length of the loan, the amount of money borrowed and the interest rate. Somewhere on the paperwork should be a block that contains “total finance charge” or something similar. This is the amount of money you will spend to borrow their money. If you are borrowing, say, $12,000 for 60 months at 20% interest you will pay an enormous amount of money to get this car.
Really, $16K of debt is not that much - I’d wager that the total cost of the car + interest would be more than that. Declaring bankruptcy to get a car is (IMO) a radical solution to a non-radical problem. What happens if you declare BK, get the car and in two years need a new set of tires for the car. You have no credit, so you must pay for the tires up front. How early do you start saving for new tires? What happens in you run over a bottle on the road and need two new tires today? Will you have enough in your checking account to cover that?
The point is, you need to think about life 6 months, a year, and three years down the road with NO credit and compare that to the immediate value of getting a new car.
For the record, I graduated college with a fair amount of debt (no student loans, just credit card). I spent my first 7 years as an officer in the Air Force driving my beater college car. The first three years I was paying off my debt. The next 4 years I was saving money so I’d never be in debt again. When I finally bought a new car I put a huge down payment on it and got a 2-year loan, which I paid off early. I’ve had some financial downturns over my career, but I’ve had enough saved to avoid going in debt (other than a mortgage). Climbing out of debt is something you only have to do once to realize you never want to do it again.
Once again: think long-term, not short-term. You CAN climb out of your debt with slow and steady progress; wiping out your credit by declaring BK and immediately taking on MORE debt seems like a rash decision.
Brainiac4 declared bankrupcy about a year before we started dating.
I think what saved his butt was that for years everything could be in my name with my credit history. We delayed buying a house until his seven years cleared. The cars were bought in my name with my income. It was a long time before we applied for any credit in his name. Its the concrete version of Piliot’s “think long term.”
Exhaust all other options before bankruptcy. Including driving a beater. Including working 2nd jobs. Including calling your relatives and begging for money.
Did you check into possibly getting some Hill-Burton funds to help pay for those medical bills?
Did you apply for Medi-Cal?
And have you tried negotiating the amounts with the health care providers? Uninsured people typically are charged more for health care.
Wait, you seriously can’t pay back $16,000 in five years? Look, if you can’t pay $300 dollars a month to pay back this debt, bankruptcy won’t help you because the day after your bankruptcy goes through you’re still going to be living from paycheck to paycheck, spending every penny that comes in. And what happens when the next medical emergency or unexpected layoff comes around? Because I can guarantee that you will have unexpected bills sometime in the next few years. How will bankrupcy today solve the problems you’re certain to have tomorrow, and the day after that and the day after that?
Here’s the solution. Keep paying as much as you can squeeze from your budget on servicing your debt. Redouble your search for a job. When you get the second income, use 2/3 of the money from that income to pay back the debt and save the other 1/3. If you are managing today with one income, keep managing with that income for the next comple of years. Even if the second family income is a crappy low-wage retail job you can pay back the debt in a year or two, and in three or four years you’ll have thousands of dollars in the bank. Even if you can’t discharge the debt on one income, why can’t you scrape by until you get that second income?
But IF a person already has credit that sucks terribly- lots of "derogs’ and such- then a Chapter 7 isn’t going to make your credit worse. If I had “onmly” $16K in debt- BUT was out of work and with no possiibility of getting work other than Food Service- then yes, I’d talk to a specialized Bankruptcy Attorney.
But not in the OP’s case. I hate to say this dude- but you debt problem is you. *Last car *you need is a 2004 Pontiac Grand Am, and the guy who is getting you that fantasic deal is selling you something you don’t need- just want. Spend less and get an econo-box. In fact, you can get a new econo-box for what you’re spending. And, if this guy is trying to talk you into bankruptcy to buy this car- run- don’t walk- away. Burn his card as FilmGeek said.
Make sure your Credit Counseling Service is legit. But get one.
Well, you might be able to “fix” you own credit. Talk to the medical bills dudes- make a cash settlement offer if they promise you a clean credit report. Pay off any recent small debts. After those steps- Get a copy of all three of your credit reports- dispute everything old, odd, unrecognized, or small. If a debt is very old, juet let it lie, they drop off after 7 years- although sometimes you have to dispute them to get them off. Sometimes- making a payment on an old Derog just makes that derog stick around longer- it’s not supposed to, but it does.
inkleberry and Dr.LoveGun, we can’t stress enough how badly you need to talk to credit counselors here. I can tell from the tone of your posts that you’re feeling victimized by your financial problems, ink, and that’s completely understandable, but feeling and acting like victims isn’t going to get you anywhere. What you need to shake that feeling is information and action - call for an appointment with a credit counselor TODAY, and start to make things happen for yourselves based on the expert information that they can give you. And forget about the car. Make no financial decisions until you’ve talked to the credit counselors.
You are not in a hopeless situation; it is just a bad situation, that is going to take time, patience, and effort to get out of it, and those are three things that are probably the hardest to take. We’re in the same boat, as are a whole bunch of us here on the Dope. You’re definitely not alone.