chapter 7 vs credit card forgiveness

[bbfire]

Hey,

I'm new to the forum and wanted to get some advice. I am about $30,000 dollars in debt, all of which is is unsecured credit card debt. I have been considering filing for chapter 7, but I know there is a very big negative that will stick with my credit for awhile. My credit is already shot, and I don't have any large sums of cash to negotiate payoffs. My question is will it be worth my time to work out a debt payment plan and still make payments for years to come, or settle all debt now, take the worst hit with bankruptcy, but start working on my credit sooner due to no bills. I do not hold a mortage or own property and have no assets of value. I should be able to file for chapter 7. Any help in this matter is appreciated, thanks.

[chane]

That's a tough call. $30k is not that much, but depending on your income, it could take years to pay off. Check out some of Dave Ramsey's programs. He's probably the best get-out-of-debt teacher there is.

[bbfire]

Thanks Chane,

Well after bills I have about 1000 each month to save, spend, etc. Let's assume I can negotiate down to 50% of my debt, which is $15,000. Over 3 years thats about $415 a month assuming collection agencies and credit companies won't be charging interest. As far as I know, there will be nothing positive going on my credit from these accounts for those 3 years. Once they have been paid off, I will still have to build good credit over the next few years. After 6 or 7 years, I could probably hope to have a good credit score with most of those negatives in the past. If I go BK ch7, I will wipe away all debt, and theoretically have $415 a month to start preparing to build good credit. If I am able to eventually challenge the BK on my credit score and remove it, I might be sitting in a better position in 6 or 7 years then having paid the debt off. Is this sound thinking or am I missing some key components.

[chane]

You could try disputing those accounts, but most likely even if you get them removed, once you pay them, they will start reporting again.

There are also some debt elimination companies that might be able to do better than 50%.

[bbfire]

True, I think BK is my best option, once it is done I can start to repair my credit within six months or so. Thanks again for the response.

[debtexecutioner]

:cool:BB Fire, Chane is right, you should look at other ways to eliminate your debt before using bankruptcy. We use our 20 + years of banking education and legal training to help people eliminate credit card debt. If you take the bankruptcy route, it will ruin your credit which will take time to rebuild.

You can eliminate your debt yourself through credit card negotiation and save thousands of dollars. One of our clients settled a $23,000 credit card for $1,500 with Bank of America. Yep, 6% of the debt. Not all banks settle that low, but it is a process and takes time. You have to know how to negotiate, write effective settlement letters, and know what to say when entering negotiations.

You can take the $1500 - $3000 you'd pay a bankruptcy lawyer, and apply it to the debt yourself and get the banks to increase your credit score at the same time.

Sara "Debt Executioner"

[OrchardParkGuy]

Bbfire, be careful when thinking about bankruptcy and these debt settlement companies. There are risks in going either way.

If you file bankruptcy and the means test allows you to file Chapter 7, you can discharge your debt in most cases and get a "fresh start." You'll have the bankruptcy filing reported on your credit report for 7-10 years and you'll have accounts listed as included in bankruptcy as well. This is very damaging to your credit score and history. If you read the public records section of this forum, many people are able to get bankruptcies removed from their credit reports with just a few letters.

If you decide to use a debt settlement company, check their rating with the BBB, websites like RipOffReport.com, and check to see if there are any attorney general or consumer affairs complaints filed against them. Lots of these companies will direct you to stop paying your credit card payments and instead start paying money into an account with the debt settlement company to be used to pay off your creditors. They'll come up with a one year to three year "payment plan" and after the end of the the payments they'll try to negotiate with your creditors to settle your accounts.

What these companies don't advertise is that during the one year to three years your credit is usually ruined even further because your credit cards will report late payments, eventually charge off, and then be sold or assigned to collections. This further damages your credit and the end result may be that the debt settlement company can settle for pennies on the dollar, however your credit score is decimated.

Another thing these debt settlement agencies won't tell you is their completion ratio. Usually the first 3-6 payments you pay these agencies go towards the fee the agency charges. They won't tell you their completion ratio because they don't want you to know that most customers don't complete the plan and most people only make it as far as to pay the fees.

And one word of advice, my employer is mentioned as having settled a very high balance account for pennies on the dollar. I won't repeat my employer's name because I'm not going to represent them on a message board, however I can tell you that if this account was settled for such a low amount that person had better luck than hitting the lottery. The only way an account with such a large balance would be settled for such a low amount would be if it is WAY beyond the statute of limitations for both the time period to sue and credit bureau report, has been assigned to collections all the way up to quarternary (four agencies) with no results, death, or dismissed bankruptcy.