Chapter 13 or CCCS - No Assets

[roselilly]

I am single, 51, no kids, no house (rent apartment), no car, $10K in 401K, no other savings or investments, less than $800 in two checking accounts, have $48K all in credit card debt, owe $9K in taxes (on installment program) and have $77K yearly salary. Was spending 1st monthly paycheck paying all debts (just monthly minimums); then spending 2nd montly paycheck for rent and expenses. Now credit card payments are starting to eat into 2nd monthly paycheck and am drowning in debt, even though I have cut up credit cards and have not charged on any credit cards since 2008. Should I file Chapter 13 or is CCCS a better choice? Thanks!

[fslady]

Roselily,
I really know what you are going through with the debt and the decisions because I was very much in your situation. I looked into CCCS but while the interest would decrease, it didn't seem like the amount of the monthly payments would decrease very much (less than $100 I think) and that was what was killing me. Every month I lived check to check and wound up with overdrafts and tons of worry. I tried to get a second job but couldn't do it healthwise. After finding this forum and reading it extensively, I contacted a lawyer, found that we communicated well, and I decided to file.
Thanks to this forum I knew what to ask and what papers to take with me for the initial meeting. The lawyer said that coming prepared made the filing much quicker and easier to do. My 341 was 1 month later and I haven't regretted the decision one time. Other than my daughter, no one knows that I filed and I've gotten along pretty well on a cash only basis. Yesterday I sent off my 46th payment - 14 more to go!
Good luck with your decision and please know that these fora are great resources and filled with caring people.

[LadyInTheRed]

I suggest you closely investigate both options. Meet with a few experienced bankruptcy attorneys and at least one reputable CCCS.

Can the CCCS get reductions in interest rates or balances so that you can have everything paid off in 60 months or less? Make sure you understand exactly how the program works. How much of your monthly payment will go to pay creditors and how much to pay the CCCS? Will they negotiate payment plans with each creditor and then distribute money monthly? Or will the CCCS accumulate your payment to first pay their fee and then settle with creditor's one by one, with late fees and interest charges continuing to accrue on the CCs in the mean time? I have heard both nightmares and success stories from people who used a CCCS. But with your relatively high income and small household size, a CCCS may work for you. But, the credit card companies must cooperate and if you have a significant decrease in income or increase in expenses, you won't have the protection of the court and could find yourself filing BK later. In a Chap 13, if you have a drop in income, you can modify your plan or convert to a Chap 7.

What do attorneys estimate as your monthly payment in a Chap 13? Multiply that by 60 and add any attorney fees that wouldn't be included in the plan. How does that compare to the total actual cost to become debt free using a CCCS?

You can get some idea of what your Chap 13 plan payment might be by running this online means test: http://www.legalconsumer.com/bankruptcy/nolo/ But, don't make a decision based on the online calculator alone. It is not a substitute for the advise of an experienced lawyer.

[lrprn]

If you file Ch 13, your unsecured creditors have no choice but to go along with your plan. Also they cannot charge interest after you file.

If you use CCCS, your unsecured creditors cannot be forced to go along and also they can continue to charge interest (even if it's lower interest) while you try to pay them off in full. Frankly, very few folks can get out of debt using CCCS because the creditors don't have to cooperate. You need a court-mandated debt reorganization plan which is exactly what Ch 13 is designed to be.


With the amount of debt you have and the fact that you haven't charged in two years and still owe this much, I would definitely make 3-4 free or low-cost intial consultations with experienced bk lawyers in your area who frequently file Ch 13s to discuss the benefits of filing Ch 13 in your specific financial circumstance.

Bottom line - if a CCCS plan cannot get you completely out of debt in five years, then Ch 13 is definitely the way to go.