I live in the U.S. and work full time and attend college via student loans.
My credit card debt is more than I can handle each month. While some of the creditors are willing to offer a settlement amount I am unable to pay what they want. I believe filing for bankruptcy is my only alternative. Here are the facts
I owe over 25,000 in credit card debt and earn around 33,000 a year. I do not own or rent a home. I have a car payment but the car loan is in another person’s name.
I have not contacted an attorney yet but I have some questions
I have stocks valued at under 400.00 will I be forced to sell them?
Will I have to cash out my 401K?
I have a personal checking account along with a Joint Savings Account what will happen to the joint account?
Will I still be able to make monthly payments on the car and car insurance even though neither is in my name?
You should be able to keep your stock and your 401k. If you declare bankruptcy that may have a negative impact on the credit rating of whoever you have a joint account with. You should be able to keep making payments on the car.
Again, IANAL. Can you get a second job? It doesn’t sound like, except for your credit cards and your car, that you have any other expenses.
Not unless it’s a joint credit card account or loan of some kind. A joint checking account won’t affect anyone’s credit score. You need to find out if the other person on the account is liable in the bankruptcy, though. That’s what a lawyer is for.
If you hold the stock in your own name (not as part of a retirement or joint account) it’s an asset which is probably vulnerable.
Most pension plans and 401(k) plans are excluded from a bankruptcy estate. Again, your lawyer needs to check, but I’d be pretty surprised if your 401(k) was vulnerable.
I’m not saying that you didn’t already attempt these things, but have you thought about a strategy for paying this debt down? First and foremost, you may have a pretty good rate on the student loan. If that’s the case, pay the bare minimum on this loan, no need to overpay if the interst rate is low. Have you tried allocating the CC debt to low interest/0% cards? If not, maybe look into it, and pay those down agressively and forego the lattes and premium cable tv. Bankruptcy should be a serious last resort, and IMO is not your only alternative without other facts of your situation. I say this because Bankruptcy will make it difficult for you to get credit in the future, or rent or buy a home later on. Not impossible, but a big hassle.
You’re gonna need a lawyer. Seriously. State laws on protected items vary tremendously.
Also keep in mind that there are two different (typical) types of consumer bankruptcy; one is reorganization, and one is complete bankruptcy.
In general, the former will allow you to retain all your assets, the latter only some. Again in general, either allows you to retain retirement accounts.
Remember, this stays on your record for ten years. Think twice, or even thrice, and, again, seriously, lawyer up.
You really really really don’t want to declare bankruptcy unless it’s absolutely necessary. My husband had to before we met, and he’s still paying for it 15 years later.
Have you seriously looked at every single other option available to you? Are you prepared to have everything but the clothes on your back taken away (including your vehicle)? Are you prepared to be severely constrained in your ability to get ANY credit at a decent rate extended to you for the next decade or so?
If so, go ahead. Whether or not you had any other choice, you WILL regret this decision.
Even Chapter 7 allows the debtor to keep more than the clothes on his back. The homestead exemption varies from state to state. The tools-of-the-trade exemption varies from state to state. Anything that won’t bring a lot of money at sale is not going to be liquidated; sure, if you bought a 60-inch-LCD two days before you declare - that’s gone - but who wants your ten-year-old analog TV? Chapter 11 is much more generous.
A vehicle loan can generally be reaffirmed in a bankruptcy. The OP has special circumstances as the vehicle is not in his name, yet one more reason to see a lawyer.
Well, I did it back in '93 when a business of mine didn’t quite work out.
First off, it costs lots of money to be bankrupt, at least for me it did. You have to pay your lawyer first. Then they file.
They will be able to inform you as to what is safe and what is not and what can and cannot be discharged by bankruptcy.
I would continue to negotiate with your card companies, but talk to some lawyers as well. Filing should be a last resort. For me the toughest thing to deal with was the personal shame I felt doing it. I don’t suggest doing that yourself.
Unless you have significant other debts, I don’t think you need to consider bankruptcy at this time. Your debt-to-income ratio is only about .75 – that’s not desperate enough to go for bankruptcy. Most people who file for bankruptcy are much worse off than that – having debts of 2-3 years income is not uncommon. You are not nearly that bad off.
Go to a credit counseling service (a legitimate, non-profit one) before a lawyer.
What does the bulk of your credit card debit consist of? Have you made a budget to determine exactly where your money goes each month? Very often you think you know, but there’ll be at least a couple hundred unaccounted for. Is it possible to take one less class and work a little more? Are you living at home? If so, besides your car, what are your expenses?
What is the credit card company threatening? Are they just saying, “No, we won’t reduce the amount of your debt.”, or are they threatening legal action and garnishment? They don’t have to reduce the amount of your debt, and really, why should they? You legitimately owe them.
Bankruptcy will follow you for a very long time. If you marry, it’ll affect your marriage. Don’t do it unless there’s no other possible option. It won’t make your life easier, it’ll make your present easier.
Yeah, when my husband filed he had about 150,000 dollars in debt and was unemployed. He had had a heart attack followed by bypass surgery at age 33 with no medical insurance.
The first thing anyone with such debt should do is figure out (if it’s not already obvious) where the debt came from. Did something catastrophic happen, or was it just poor spending habits?
I’m disturbed by you saying that you can’t get a second job because you’re in school, and wondering if you can get another loan for school. I realize that school is important, but you owe people money legitimately. It will require sacrifice to pay them off, perhaps sacrifice like taking time off school.
If you are considering declaring bankruptcy you should not be considering taking out more loans! I agree with jsgoddess that perhaps a rethinking of your education is in order. Postponing your education might be the best thing until you take care of this debt problem.
Lawyers get their money by filing your bankruptcy. Don’t get a lawyer if you’re “thinking” about declaring, because they have an interest in it.
There is almost always an alternative to bankruptcy. Banks, loan providers, and credit card companies always know exactly how much debt you’re in, and how much you make a year, and are not willing to provide loans to people that don’t seem to be able to pay them off because of their income/debt ratio. A friend of mine was denied a loan recently for that very reason, even though he has an excellent credit score.
Talk to your bank, and see if they can provide a loan with an interest rate lower than the credit cards’ rate. Use the loan to pay off the cards, and instantly like magic you’ve got lower monthly bills. There are dozens of other places (not just your bank) that do these kinds of loans all the time.
Anything is better than bankruptcy. Eating hot dogs and ramen for 3 years is better than bankruptcy. No cable is better. No pets, no new clothes, no premium gas, no vacation time, it’s ALL better than bankruptcy. Living with a roomate in the ghetto is better. Make any sacrifice you have to, but don’t talk to a lawyer and don’t declare bankruptcy.
IANA lawyer, credit counselor, financial advisor, etc.
I strongly support t-bonham’s advice of going to a credit counseling service pronto; see if your school has some resources that you’ve already paid for as part of your tuition and fees.
They’ll probably tell you this: Cut up those credit cards! Why add to your debt load, and why add to the high-interest debt at that?
Good luck. It’s a big hole you’re in, but getting out without declaring bankrupcy IS doable.
You need to call your credit card companies & tell them your situation and ask to get into a repayment plan that you can afford. They are highly motivated to help you because they want their money. Bankruptcy is a very bad thing, worse than being $25K in debt. If you declare BK, you become (financially) a non-person, and you’ll be paying higher rates for everything, you’ll have to leave security deposits on all of your utilities, you may have difficulty getting a job or a place to live, and pretty women won’t sleep with you. Okay; I made that last one up, but I’ll bet it’s true.
If you pay down your debt without declaring BK, you’ll own your life and won’t have to live in hell for seven years. If you’re in college now, I assume you’re going to be trying to get a job and an apartment in the next seven years. Those will become infinitely more difficult with a BK on your record.
Please, please, please — contact your creditors again and try to get better terms than those they initially offered. Don’t start out your professional life with such a huge strike against you.
I used a debt consolidation program through a company that talks to all your credit card companies and other debts and works out a payment arrangement. I had to agree to automatic withdrawls. In return they lowered the interest rates and did not charge other fees. I could not incur any other debt at this time. If you pay off a lower balance card they will then add that money to pay off another card and so on. They do ask for a small donation every month however they waived it for me, so it’s not required. I don’t know if I’m allowed to say the name of the company here.
Anyway, it would have worked for me except I had an illness that cut into my work hours causing me to get behind on my mortgage and I did end up declaring bankruptcy to keep my house. I had that paid off in 3 years and I was able to get a new car loan after but with higher interest than someone with no bankruptcy and my only debt now is my mortgage and car loan. If I do ever get another credit card I will make them keep my limit at $500. Something I could conceivably pay off in a month or two at the most.
But groo is right, pretty women don’t sleep with me … then again I’ve never asked.
I’ve tried contacting a few of the lending institutions that I have accounts with and two of them will not accept any plan. I don’t want to file but the Collection Agencies that are calling on behalf of one of them is trying to force me that way.
The only way for me to continue my classes is to take more loans out. My job will be reimbursing me 80% but only at the completion of the degree.
I have to read more about the debt collection laws in my state because that CA may have committed a violation and I’m not certain if each contact is a separate violation or not. If each contact is a violation I may have enough to lessen the others into breathing room.