are charge-offs included in bankruptcy

[girlthree]

Hello everyone,

I have been reading this forum for a while and trying my best to educate myself about bankruptcy. I am very interested in filing a bankruptcy but I don't know if my debt is eligible. Here is my situation: I will be graduating college in May. Totally uneducated on credit, money management, etc. I messed up really badly since I've been in school. I'm in NO position to make any payments on anything as I have been unemployed for almost a year and I'm virtually homeless.

A description of my debt:

$ 60,000 in student loans (I know these are not dissolved in bankruptcy and that's fine they are all in good standing)

All of my other debts (detailed below) are charged-off but I am continually being harassed by phone and mail from the collection agencies that now own the debts. Plus even though the debts are old, I can't qualify for anything an apartment, a car, cell phone, store cards, NOTHING.

$3,500 from a repossession

$1,500 in medical bills

$11,000 from a lease that I broke

$4,800 from an eviction

$2,000 in credit card bills

> $1,000 in random debt (electric company, old cell phone, etc)

Can charge-off's be included in a bankruptcy?

In a few months I will be graduating. I tried to start paying some of the smaller balances off last year when I was working full-time but that made my score drop even lower and further damaged my credit worthiness. So at this point, even if I could I wouldn't want to pay it. I want to be able to find a job once I graduate and start a life. I have taken a financial education class and am confident that I will NEVER allow myself to get into this type of situation again. My older brother is willing to pay for a bankruptcy lawyer if it's the best situation for me to overcome this situation. So does this sound like I should file? Also I'm in school in Maryland and will likely stay here after I graduate (this is also where all of my debt was incurred) but my permanent address is is NY. Where should I file? My brother said that he heard a bankruptcy lawyer is about 1,500 is that a fair estimate? Does anyone know how long from filing to discharge takes?

Any help, advice, suggestions, etc would be GREALY appreciated!

Respectfully,

Elle

[Dst1]

The short answer to you questions is , "yes" charge-offs are included.

The long answer is that you only have one debt that really seems significant and that is the 11K for breaking an apartment lease and that boggles my mind. I do recognize that the rules vary from state to state but the truth of the matter is that apartment leases are relatively easy to get out of. Have you talked to an attorney about this debt? I'd place the odds at least 50% that you don't actually owe it. Landlords come crying about broken leases all the time mostly because they know renters don't know their rights.

The reason I make that point is because your credit is already ruined. BK is not going to help it. But you can only file BK once every eight years. You could probably settle the rest of the other debts for pennies on the dollar. I'm not sure that you are a good candidate for BK, is what I'm suggesting.

[girlthree]

Thank you DST1 for your opinion. I have tried to settle the amounts and even what they are offering is beyond my reach to pay. When you say that I may not be "a good candidate for BK" are you saying that I may be inelligble? Is there a certain amount that you have to owe to file? Or are you saying that you wouldn't file because for you the amount is low and you would be able to afford it?

I know that the amounts that I owe don't seem significant compared to you or others may owe but they are significant to me. Big debt is relative because while 50,000 may be killing one person it can take double that to hurt someone else. The $20,000 that I owe may as well be $200,000 because I don't have it. My debt may be small to you or others but it is literally KILLING me. The apartment complex has a lawyer representing them that calls me 10 times a day, sends me threatening letters and even came to my brother's house! I can't keep living like this. I don't even answer my phone when it rings because it is constantly ringing with bill collectors being rude, angry and threatening to sue me or garnish my non-existent checks. I know that I messed up but I don't want to be harassed and afraid anymore because of it. I'm terrified that I will miss a call about my son or some other emergency because I ignore the phone to avoid creditors.

Recently, I went to look at two reasonably priced apartments in safe areas where I would consider living once I graduate and secure a job. They told me that with my current score they couldn't lease to me but with a discharged bankruptcy and proof of income they could. I have heard the same things from carmax and a local ford dealership. I have been couch hopping for almost a year and taking a train and two buses in the cold to every day with my young child to drop him off at daycare. I then take another two buses to school. I need to be able to get a place to live and get a car. My kid deserves more than sleeping at my brother's house or on friends' couches. We had record-breaking snow this week and my two year old and I had to wait over an hour outside for the bus. I can't do this to him anymore. I need a way out. I want a better life and a better life for my kid. All of these debts are over a year old. I've taken a six week financial education course, learned to handle money more responsibly and grown from paying for the results of my poor choices. Unfortunately none of those things are making it possible for me to start over. Nobody cares that I'm sorry. If bankruptcy is a way that I can do better and get a fresh start it is what I am willing to do. Isn't that essentially why people file bankruptcy- because the amount that they owe is insurmountable and they want a chance to start over? If jumping out of a window is the only way that I can do that, well I've considered that too.

Elle

[Dst1]

I understand what you are saying. You are absolutely right that 20K might as well be 200K if you can't pay it back and people are demanding money left and right.

Yet at the same time BK should not be knee jerk reaction to a problem. It should be a long-term strategic choice. I would highlight again the reality that you can only file for BK once every eight years. What happens if you file BK, get that fresh start, and three years later find yourself back in the same boat as today.

There is an old saying in Africa that when you are out hunting an elephant is much easier to hit than a group of bees but the elephant is much more trouble if you miss.

The purpose of my post was not to dissuade you from filing BK. I can't know every detail of your situation, your personality, etc. I only wish to encourage you to think through other options that might be available to you. Because being able to file BK only once every eight years means that it's imperative you correctly identify the elephant in the room and that you don't miss the shot.

[BobMango]

girlthree, the thing to really consider at this point is that you are essentially judgment proof based on what you are telling us. Filing bankruptcy will not get you a job or a car or a place to live. The odds are that until you resolve your income problem you will continue to rack up bills you can't pay, perhaps medical, etc. Why use the nuclear option now when you have other choices?

It sounds like you mostly need relief from the harassment for now. You can get your creditors to stop contacting you by sending them a letter telling them to stop. Additionally, since you are "couch hopping" I assume the calls are coming in on your cell phone. That's easy to resolve. Simply get a prepaid cell phone and get rid of your other one. Then only give that number to folks you want to be able to reach you.

My advice would be to wait until you have some source of income that you can use to provide a place to live and a car to drive. Until then take advantage of ways to eliminate the harassment and start focusing on housing and income.

[girlthree]

I truly appreciate your comments DST1 and BobMango,

It seems like both of you are far more knowledgeable than I am regarding BK. Can you please tell me some of the other options that are available to me? I seriously have NO idea what else I can do. I am interested in filing bankruptcy because I was told that it would give me a fresh start. If there is some other way that I could get a fresh start I would TOTALLY be open to that. I am an education major and will be graduating in May. I have already been offered a job that will begin in August at the school where I did my student teaching, it isn't my first choice and I'm hoping to find something better but if nothing comes up by May 15th (the deadline by which I have to accept or decline the offer) I will take it.

I am not currently running up any debt and haven't run up any new debt debt since January 2009 when I completed the financial education course. Since I have been fine not getting caught up in debt in a year, (which was previously not something I was able to do) I think that the class that I took was successful in teaching me how to manage money. I didn't try to get a car or apartment now with no job, as clearly NO lender would give an unemployed girl with a low score either of those things. I took a copy of my 3 credit reports and the offer letter from the school and asked would I qualify in August once I start working. I was told that since my score is so low that I wouldn't but if I had a discharged bankruptcy I would qualify. That is actually how I began thinking about filing because two separate apartment complexes, carmax and ford suggested it. I asked the facilitator of the financial education course and she also told me that many people find it easier to get cars etc after filing because it shows that you are actively trying to do something about your debt rather than ignoring it? Is that incorrect? I'm really only going by what I've been told, I have NO idea if this is good information or not. Once I do start working, (if I accept the only offer I have so far) I will only be making $ 43,000 per year. That isn't enough for me to pay for a place to live, a car, day care, utilities, groceries, etc and pay the $20,000 + that I owe. My son's daycare is $1000 per month which will be nearly one whole check after taxes and benefits. My parents are paying for daycare now and helping me financially while I finish school but all of that stops in August once I start working. Based on my estimates I will only have about three hundred dollars left after I pay all of the bills that I will have which doesn't include any unexpected emergencies, expenses or pseudo luxuries like new toys for my son, cable and internet.

Is bankruptcy not a good idea because my debts are charged-off or because of the amounts of my debts? I am just feeling totally trapped and don't see how things will improve much even when I start working. If bankruptcy truly isn't right for me, I am totally open to any other suggestions as to how else I can start again.

Respectfully,
Elle

[nc73]

It might actually be easier if you did file. So go ahead and do it. Just remember you won't be able to file again for a long time.

[BobMango]

girlthree, I'm wasn't suggesting that bankruptcy is not the right choice for you, just that it might be a little premature. There are actions you can take to relieve the stress you are under.

However, since it looks like you will be working in August, then you might as well get started now. It will take some time to find an attorney and get all of your paper work together. If you can get filed by May, you should have a discharge before you start work.

Fees for attorneys vary greatly, but I would think you will be able to find a decent attorney for that price. My attorney charged $999, then I had to pay the filing fee of $295, a reaffirmation agreement cost another $125 so my total cost was right around that amount.

It looks like all of your debt, charge-offs and judgments will be handled by the bankruptcy giving you that new start you need.

Good luck!

[Dst1]

Filing for Bk in your situation isn't a bad idea. But that doesn't mean it's the best idea. Yes, you owe about 20K in absolute terms but assuming you owe it all (and I have expressed doubts about that huge 11K bill) debt normally gets settled for between 20%-40% on the dollars once it has been charged off. That means cash that has to come out of your pocket is more likely to be 4K-8K. Now, if you can get rid of that pesky lease bill (which I think is likely) then the cash out of pocket is only 2K-4K. That seems to me very manageable on 43K a year.

The part that I think you are missing here is the fact that the nominal amount you owe means nothing. Once the debt was charged off it was sold to a debt collector for a little as 1-2 CENTS on the dollar. If debt collector buys the debt for 1-2 cents and you pay him 20 cents on the dollar they have still made a handsome profit. When you look at it from that perspective BK starts to look a whole lot less impressive.

The odd part is that I'm normally opposed to debt settlement. But I think your situation is one of the rare situations where I'd think about it.