What to pay off?

[cory1848]

I was discharged in January, included my house and didnt reaffirm my 2 vehicles but I am current. THe house I am letting go. My questions are, what should I pay off? I have two car loans, one with $7k left, the other with $12k left. I also have two student loans (one for me and one for the wife). Mine has $25k left, my wifes has $14k left. The student loans are killing me and I need to find away to get rid of them as quickly as possible. Not sure if I should go ahead and shoot to pay off car and then dump that money to the student loans, or to just keep paying the cars, and try and roll and extra money into the student loans when I can. Payments are not bad on the cars but it is still a payment I dont want (but need the cars). I have 30 months left of one car, 58 months left of the other car and 15 years left on the SLs.

Since filing BK7 and including the house, I am bank rolling all my extra cash. By the time I move I should have roughly $20k banked away. SHould I just keeping paying monthly on the loans or maybe use the $20k to get rid of some of the loans?

Trying to figure out the start thing to do to get debt free.

Thanks

[rose1]

I was discharged in January, included my house and didnt reaffirm my 2 vehicles but I am current. The house I am letting go. My questions are, what should I pay off? I have two car loans, one with $7k left, the other with $12k left. I also have two student loans (one for me and one for the wife). Mine has $25k left, my wifes has $14k left. The student loans are killing me and I need to find away to get rid of them as quickly as possible. Not sure if I should go ahead and shoot to pay off car and then dump that money to the student loans, or to just keep paying the cars, and try and roll and extra money into the student loans when I can. Payments are not bad on the cars but it is still a payment I dont want (but need the cars). I have 30 months left of one car, 58 months left of the other car and 15 years left on the SLs.

Since filing BK7 and including the house, I am bank rolling all my extra cash. By the time I move I should have roughly $20k banked away. SHould I just keeping paying monthly on the loans or maybe use the $20k to get rid of some of the loans?

Trying to figure out the start thing to do to get debt free.

Thanks

First thing I would do is get rid of the cars. Look for 2 used cars that is about 8 years old or so and buy it cash. I bought a used car for $2000 and it's been a huge money saver for me. No payments and more importantly, no interest. And it's great on gas. The interest rates will kill you! I wouldn't be surprised if the bank raised your rates because of the recent bankruptcy filing. There's no way around the student loans but there is a way around car payments. I think that would be a good start. You want to has as little payment responsibility as possible. If you can do without cable tv, cancel it. These little things add up. Only go for the necessities.

[cory1848]

First thing I would do is get rid of the cars. Look for 2 used cars that is about 8 years old or so and buy it cash. I bought a used car for $2000 and it's been a huge money saver for me. No payments and more importantly, no interest. And it's great on gas. The interest rates will kill you! I wouldn't be surprised if the bank raised your rates because of the recent bankruptcy filing. There's no way around the student loans but there is a way around car payments. I think that would be a good start. You want to has as little payment responsibility as possible. If you can do without cable tv, cancel it. These little things add up. Only go for the necessities.

I have considered that but I do need reliable vehicles as my commute is about 700 miles a week. I am not having trouble paying for them now since the BK was done so that isnt a concern. I have done the old car high mileage thing before and its cost me more with repairs than it would have to keep paying on my current vehicles. My rates have not changed. $12k loan is at 8% and the $7k loan is at 12% but the interest is pretty much already paid for on that 12% loan. I have about $2k a month that I am currently saving after all bills are paid. So just wondering the best use of that money.

[cupcake]

Out of curiosity, how did you manage a CH7 discharge with that kind of disposable monthly income?

Do you have equity in the vehicles? If not, I agree that you should get rid of them. You can get reliable transportation without having huge repair bills and if you have an extra $2k per month you can get save enough in four to six months to get a couple of nice vehicles. Then, focus on the SL debt.

[cory1848]

Out of curiosity, how did you manage a CH7 discharge with that kind of disposable monthly income?

Do you have equity in the vehicles? If not, I agree that you should get rid of them. You can get reliable transportation without having huge repair bills and if you have an extra $2k per month you can get save enough in four to six months to get a couple of nice vehicles. Then, focus on the SL debt.

The income became disposable only after the BK7, that was the whole point of filing. Got rid of all my CC's, unsecured loan payments and housing payment. Before filing I had about $150 a month to try and live on while paying minimum payments. That $2k a month is also going towards a reserve as well.

No equity but not that much upside down. Not enough upside to warrant getting rid of it yet. I did not reaffirm either so if I were to ever get in trouble, I can just give it back without consequence.

4-6 months isnt going to solve my student loan issue. Almost $40k I need to try and clear out.

[cupcake]

The income became disposable only after the BK7, that was the whole point of filing. Got rid of all my CC's, unsecured loan payments and housing payment. Before filing I had about $150 a month to try and live on while paying minimum payments. That $2k a month is also going towards a reserve as well.

No equity but not that much upside down. Not enough upside to warrant getting rid of it yet. I did not reaffirm either so if I were to ever get in trouble, I can just give it back without consequence.

4-6 months isnt going to solve my student loan issue. Almost $40k I need to try and clear out.

No, four to six months isn't going to solve your student loan issue but it could easily solve your vehicle issue. And, without vehicle payments, you'd have extra money you could put toward your student loans.

I understand that the income became disposable after the CH7 discharge but I just don't understand how you weren't forced into a CH13 repayment plan with $2k per month in disposable income that could have went to pay your creditors. There are many people on this forum who were forced to file or convert to a CH13 because of a lot less monthly disposable income.

[cory1848]

No, four to six months isn't going to solve your student loan issue but it could easily solve your vehicle issue. And, without vehicle payments, you'd have extra money you could put toward your student loans.

I understand that the income became disposable after the CH7 discharge but I just don't understand how you weren't forced into a CH13 repayment plan with $2k per month in disposable income that could have went to pay your creditors. There are many people on this forum who were forced to file or convert to a CH13 because of a lot less monthly disposable income.

Because I met the means test, If I were forced into a 13, I wouldnt be any better off than I was before payment wise. If in a 13, it wouldnt be disposable anymore. If I remember correctly, the means test goes off income levels, not disposable income. My income level along with my wifes, isnt that much. Here I believe the limit was $4600 monthly. We came in at $4100 if I remember right. All approved by Trustee. The only outstanding bills I have now besides utilities and everyday expenses, are 2 car loans, and 2 student loan payments, hence the newly acquired disposable income. My monthly expenses now after discharge at roughly $2000, that includes the loans and groceries, gas, utilities, and misc expenses. So thats where it all comes from. I had a lot of unsecured creditors discharged which freed up a lot of money.

[HakunaMatata]

I imagine your DMI is related to no current mortgage expenses, correct?

In terms of your post-BK debt plan of attack...

I'd definitely apply additional funds toward loan payments AND create a nice nest egg. If you have future moving/rental expenses, I'd secure these funds first (place them in a Money Market account or short-term CD).

You state the student loans are "killing me". Your auto loans weren't reaffirmed; and, you mention the vehicles aren't worth getting rid of YET due to reliability and insignificant negative equity. One loan won't go away. The other (the bank) can drive away.

If these aren't long term vehicles and you've pondered returning them, I'd focus on the debt that presents the greatest frustration to you -student loans. However, if you intend to keep the vehicles for an extended amount of time and the interest rate is higher, I'd be inclined to tackle this debt first. The length of the student loans is longer and if the vehicles are paid off, you could apply car funds to SLs.

[cory1848]

I imagine your DMI is related to no current mortgage expenses, correct?

In terms of your post-BK debt plan of attack...

I'd definitely apply additional funds toward loan payments AND create a nice nest egg. If you have future moving/rental expenses, I'd secure these funds first (place them in a Money Market account or short-term CD).

You state the student loans are "killing me". Your auto loans weren't reaffirmed; and, you mention the vehicles aren't worth getting rid of YET due to reliability and insignificant negative equity. One loan won't go away. The other (the bank) can drive away.

If these aren't long term vehicles and you've pondered returning them, I'd focus on the debt that presents the greatest frustration to you -student loans. However, if you intend to keep the vehicles for an extended amount of time and the interest rate is higher, I'd be inclined to tackle this debt first. The length of the student loans is longer and if the vehicles are paid off, you could apply car funds to SLs.

Yes, no mortgage payment is why I have all this "extra" income. Student loans killing me in terms of length, not payment amount. I am thinking its more wise to pay off the vehicles, then roll that payment over to the student loans to help drive down the balance. I guess interest rate really isnt an issue since they are all pretty low.

[BobMango]

Yes, no mortgage payment is why I have all this "extra" income. Student loans killing me in terms of length, not payment amount. I am thinking its more wise to pay off the vehicles, then roll that payment over to the student loans to help drive down the balance. I guess interest rate really isnt an issue since they are all pretty low.

Many personal financial experts recommend a strategy that involves paying off smallest debt first, then applying that payment in addition to the payment you're already making on the next biggest debt. Continue this as you pay off each debt until you get your biggest debt paid off.

Having said that, I would really explore getting rid of the cars and buying lower cost replacement vehicles. If you have $2K a month left over, save for two months and let the most expensive car go. Spend $4k on a good used car, then take another two months and replace the second one.

I know lots of folks use the "I need a reliable car and repairs cost more" rationale, but that really is not true. Say you are paying $400 a month for a car payment, that's $4,800 a year. Add to that the higher insurance costs and you're easily over $5K a year for a new car. If you only financed that car for three years you're over $15K in your new car cost. I would have a hard time believing that you could spend an equal amount on repairs if your goal is to have reliable transportation. The simple fact is that most folks are emotionally attached to their cars or view them as status symbols and would be ashamed to be seen in an older car.

I just bought a 10 year old vehicle for my daughter for $1,800. The body is in perfect shape and you really can't tell what year it is. Mechanically it needs new belts and some general maintenance, but it will run reliability for a number of years. I'm willing to bet dollars to donuts that I won't need to spend $15K to keep it running over the next three years.

Make the smart financial decision, get rid of the cars and their loans, then get those student loans paid down. Start saving and pay cash for your next car; (new or nearly new if you're willing to let some other sucker take the depreciation hit.)

[BCA2009]

Since you didn't reaffirm your cars, you could get rid of them at any time, so you don't have to make immediate decision on those. I would tackle the smaller student loan. If you can really save 20K before you are kicked out of your house, you would have one loan knocked out with 6K left over, probably enough to payoff the lesser value car. Then apply the excess from those loans to the larger student loan.