Long story short: racked up a bunch of credit card debt over a long period of time (~10 years), was slowly paying it down, then lost job suddenly and was out of reliable work for 2 years. Have been working for the last year and a half but my debts went to collection long ago. Once I started working again I paid off all the little debts, but remaining are the two big CC ones, a $9,000 that ballooned to $14,000 with interest and penalties, and another for $8,000 that ballooned to about $11,000 with interest and penalties. While I managed to arrange a payment plan the interest is still running and after making payments for over a year my balance has not gone down at all, and in fact may have actually gone up.
My monthly net income is only $2200. I don’t own a car or a house or a yacht or anything like that. I don’t own anything at all really, with the exception of my clothes, my guitar (I don’t even own an amp for it anymore), and my year-old laptop. My credit is already total shit. Basically I have absolutely nothing to lose and everything to gain.
Sounds like a no-brainer. Just view it as a business decision, as utilizing a tool available to you, because that’s really what it is: the biggest positive step you can take in your finances right now is to eliminate that debt, and bankruptcy is going to be the cheapest and fastest way to do it. There’s literally nothing short of winning the lottery that you can do right now that will improve your financial picture more. Most everyone I’ve ever spoken to who has filed only wished they had done it sooner.
Don’t be surprised if your credit actually goes up after you file (and I mean immediately after, not years later). It’s weird, but it happens. Your score will still be shit for a while, but you’ll bounce back faster than you think.
That’s what I’ve been told. Reason being that your debt gets reset to 0 instead of being a huge negative number. Makes sense I guess. Making tiny meaningless payments sure ain’t improving it any.
I did the more-or-less Ontarian equivalent, a “Consumer Proposal”, about ten years ago. Four and a half years of threadbare living while I paid back part of the loan in return for forgiveness of the rest, and the debtors off my back. Then that was over and I built up savings and an excellent credit rating. And that was very good, because then I got laid off and I had NO debt and was able to live on my severance payment for over a year while I got other work. If I had had debt, I would have been screwed.
If you’ve made payments for a year and the balances haven’t really budged, and your credit rating is already shot, I don’t see a downside for declaring bankruptcy, either. Bite the bullet and get it over with, I guess.
You sound like the ideal candidate for Bankruptcy. Look at it this way. The credit card companies sold your debt to collection agencies. They viewed it as a business decision so you should to.
Hey, I had to declare Chapter 7 bankruptcy due to my former husband’s medical condition back in 2005 (discharged in February 2006) and it was the best thing I have ever done.
We weren’t behind in our payments and my credit was still stellar, but my ex was going to have to quit his job due to his disability and we were not going to be able to pay our bills after losing 60% of our income. We got to keep our house. All unsecured creditors were out of luck. Creditors know the score; they took a risk and lost this time.
Within a year, I had a new credit card to start rebuilding my credit. Last year, when I got divorced, I was able to get a mortgage without any trouble so I am buying a house again.
Things will get better. And they’ll get better faster if you aren’t living under a crushing load of debt.
I really wish I could do this. But my spouse did it about 7 years ago (before we married) and it took him until this year to get credit cards again. I entered into a payment plan with my cards after I was laid off but of course the credit card companies then closed my accounts. Living in constant fear that you’ll need to make a large emergency purchase, without any way to do it, isn’t fun. We had to borrow $800 from a relative to fix my car and can’t pay it back. We are barely making it paycheck to paycheck trying to pay the stupid thing off but it is going down. Still, it’d be nice to have that $650 a month to put into savings.
It’s amazing how easily you’ll learn to do without. I used to have that very same fear before I filed in 2009 due to a long illness and the slow demise of my business.
I spoke to a lawyer this morning and she emailed me some forms and papers to look over and fill out. Luckily since I don’t own anything I can fill out most of the petition questionnaire with “N/A,” and even luckier I live in one of the richest counties in the country so I easily fall well below the “median income” threshold. Now I just gotta save up $1400 to get this ball a-rollin’.
As it was explained to me today, at least in Maryland, the attorney’s fee is $1000 (varies by lawyer obviously, but this seems to be the general standard fee), the filing fee is $325, and the counseling courses are $50 each (you have to take 2). So $1425 barring any complications.
I’ve been through this. It’s not fun. Fortunately, our lawyer accepted weekly payments over 10 weeks.
It was a huge relief. Everything was secure and looking good and my job went poof when the company I was working foe went tits-up. (right after a promotion, too)
Sometime things beyond our control make this type of thing happen.
The original lenders long ago charged off the accounts and sold them to collection agencies. My payments have been going to a collection agency who is still running the interest. After a year or so of making regular payments to the tune of over $4000 my balance has only gone down $120. That tells me that they will never let me pay it off. I’m sure they bought my debt for only pennies on the dollar so they’ve easily made back their money and then some by now. So fuck 'em. I’ll be back to 0 and can start building my credit back up immediately. Making insignificant payments forever is only going to ensure my credit stays in the shitter.
I am finding your logic virtually impeccable. Try not to think about what else you could have done with that $4000 (like put some of it towards paying for your bankruptcy).
I have known people that were too poor to be bankrupt… if you look around you might be able to find a trustee that will allow you to make payments instead of the lump sum up front… you would need a current job to do so…
I have a job. And I can live frugally enough to stash away enough to cover the filing fee ($325) and my lawyer will let me pay her later (which will be a LOT easier when I’m no longer throwing money into the collection agency’s money pit). So by this time next month the paperwork will be on file with the court and I’ll probably be in the midst of the required credit counseling class.
