Chapter 13 vs credit card negotiation

[cantkeepgoin]

Hello, I'm new here, but I've been reading a lot of posts and it has already help me out so much. I'm hoping that you can help me, I think that we have a different situation. We are a sole proprietor in a construction equipment company. We are under the means test, but have assets in our equipment so we would need to file a chapter 13 instead of a chapter 7. Up until last month our credit score was 760, and we were never late on a payment to our creditors. We have not been able to make our credit card payment for over a month now, and I'm really stressed out! We have over $150,000.00 in unsecured dept, and we have a house that we are just a little upside down on. Our business is very seasonal and this recession has hit us very hard.

My husband thinks that we should sell a piece of equipment and try to negotiate some dept. We would still have approx $100,000.00 in dept, plus the taxes that come with the negotiation. He thinks that filing bankruptcy will ruin us forever, or at least a very long time.

I'm really scared that if we do what my husband wants, we will not be able to make it and it will be too late to file bk. We are both really scared about filling for this, but I think it is our only option. I am ready to file now, and get this behind us as soon as possible.

I would love ANY input on this for both or our sakes. Thank you very much!!

[moe]

I can kind of relate to this as I was always paying on time and am afraid to be at the tipping point now.

When I read these things, I feel like ANYTHING is better than Chapter 13. That's a very uninformed impression. If there is ANY WAY to negotiate down debt, I would take it over 13. But I don't have the money right now.

Please--if you do figure out a way to do this (we have the same amount of debt but I don't have a way to get any money to negotiate with at the moment) please do come back and explain how you did it. I would rather do anything than go through Chapter 13.

[LadyInTheRed]

Cantkeepgoin, what is the value of your business equipment? Are you aware of the California wildcard exemption that allows you to exempt $23,250 of any property? There is also a $2,200 tools of trade exemption. If you have too much equipment to exempt, but are willing to sell some equipment to settle a debt, why not just surrender it in a Chap 7 and get rid of all of your debt?

Filing bankruptcy will not ruin you forever. Debt settlement will also be a negative mark on your credit report and will be there for as long as your BK will. If you are already missing your payments, it won't be long before your credit is shot anyway. Your credit rating should be your last concern at this point. It will recover. The BK will be off your report after 7 years and the negative effect of the BK will diminish over the time leading up to that.

If you do have too many non-exempt assets that you cannot part with, Chap 13 is not the end of the world. But, if you pass the Chap 7 means test and file Chap 13 so you can keep assets, you are likely to have a difficult Chap 13. If you need to consider a 13, be sure to consult with several BK attorneys experienced with Chap 13 and get a good idea of what your likely plan payment would be and make sure it is something you can live with.

If you can't come up with a liveable Chap 13 plan, you may need to face the fact that you can't keep those assets. I know that is tough when you use the assets to make a living. Perhaps you can lease some equipment to replace what you have to give up.

It is foolish to get into a plan that is doomed to fail. But, it is almost as foolish to avoid a Chap 13 at all costs if it is a good option to resolve your debt in your particular situation.