Trying to Decide if I Should Do Chapter 7

[Dan76]

Hi Everyone,

I wanted to tell you a little about the situation I'm in and why I'm considering filing BK and wondering if my concerns are valid and justifiable for doing it.

I'm actually not behind on my payments, but my debt payments total about 65% of my income. Everything else goes to rent and living expenses. I'm at the point now where I'm charging things like food, clothes and house items because I just don't make enough money every week to keep up.

I made the mistake of trying to pay off my higher interest cards by using a low interest line of credit and keeping the balance low by charging everything on an American Express and paying it off at the end of the month and depositing all my money into the line of credit. I just was not able to have a surplus because of my lower income and I went further into debt. I also have an additional strain on my income because my girlfriend has to now work for lower wages and I need to make up for it.

I don't own anything valuable, I rent and I finance a car with $10,000 in negative equity.

The main reason I don't want to do it is that I wanted to prove to myself that I can get myself out of this. I actually own a small home business, a sole proprietorship and make a little extra money and I am slowly building it up, but my main concern for doing this now is the current state of the economy. I don't want to be stuck with all this debt when things get really bad which I'm thinking they probably will based on the current track we are on. I'm thinking more long term and being prepared which I can't do because I have no money.

I have already had my consultation and now it's just time to decide weather or not to go through with this.

My question in this. If I do nothing and we continue to go into an inflationary depression won't my debts just be erased with cheaper dollars as long as I'm still employed? I was reading in a book that if the dollar collapsed the banks will be not as concerned with going after collections and that might be a reason not to file now.

Also I have a merchant account for my business and accept credit cards through my website online. If I file Chapter 7 will they close my merchant account? I'm not incorporated. Also my business checking account is at the same bank where a lot of my debts are held. Will they or can they close this?

So basically my concerns are I think I need to do this now so that I can save and prepare myself in the likely event things go really bad. I know that if I saw a brighter outlook I would probably consider other options, but this is more of a survival tactic.

I also would like to free up more cash to invest and grow my business more, but concerned about the merchant account and business checking. I have an average credit score but it's most likely only a matter of time before everything is maxed out and I fall behind.

I would love to hear your input and opinions about my concerns and what you think is right for me to do. I did not think this would be such a hard decision to make but I feel as if I have to do it very soon. Also I no this may sound stupid, but the way I look at is this. A lot of very wealthy people use loopholes to avoid taxes and get rid of debts, so why should I feel bad about using the system to my own advantage as well to protect myself. Do these banks really lose anything in a Chapter 7? I'm sure they are protected by some kind insurance right?

[BKlooker]

Wow, you situation is similar to mine…I am not self employed, but also had issues with upside down mortgage and CC debt. My best advice is to go ahead and enlist a good attorney, as that is going to be your best source of guidance through the process if you are ready to get it going. From there, it’s just time and a lot of patience. Do some homework and make sure whoever you get is knowledge and experience, with good reviews/referrals. This is a big, life-altering financial decision, so you can’t really afford to have someone “learn on the job” at you expense.

I also recommend you NOT stop paying on stuff until an attorney and you work out a firm plan and he/she says it’s wise to do so, if you can avoid it. It’s going to prolong the “worry” and credit-call period for you when/if you decide to file.

Don’t feel bad for the banks, whatever you do. They have ample insurance, lawyers, etc. to cover their own behinds just fine. They will take a hit just as you are, but the bank is not going to lose sleep over your losses, you are (they see cases far worse than yours every day ). I was like you as far as worrying about the banks, the stigma, the credit score, etc. I then started to read around and see how common BK is, how many people have had it at some point in their lives, if not multiple times even (you would be amazed!), how quick it is likely to be, and how fast you may recover, relative to keeping up the current cycle.
Once you realize there is more to life that a number on a piece of paper and that within a couple of years (sometimes less), you will likely be just fine in qualifying for most types of credit, it’s just a matter of round up papers, give to lawyer and pay lawyer, ignore the bill collectors for few months it takes to get through it, and it’s over and done with. Even if you are pushed to Ch 13, from what I have read it’s the lead-up that is the hard part, not the actual process, especially with a good lawyer.

Banking so much extra money each month means a lot of freedom. I can’t wait to get there myself!


Note: Not an attorney and not giving legal advice, just anecdotal opinions of course

[btbeme]

My two cents...

It will take you 30-40 years to pay off your debts at their minimum payments. Any time your unsecured debt payments exceed 15-20% of your income, you are on a very slippery slope. 65% is an undue hardship and unloading it (and not making the same mistake twice by running it up again later) will give you a new outlook on the world.

FInd a good attorney that can help you prepare for an eventual BK. Mine says that his typical client retained him 7 months before filing. Some - many - attorneys just want to turn and burn their clients as fast as possible. My first attorney interview was exactly 3 minutes in length, including the time it took him to interrupt me several times before I could ask questions. My 6th attorney interview ended up being the one I hired, though I talked to a total of 12 attorneys along the way.

Plan. Prepare. Hire the right representation. Get your ducks in a row. And the get some sleep.

[tcreegan]

Hello Dan76,

If I do nothing and we continue to go into an inflationary depression won't my debts just be erased with cheaper dollars as long as I'm still employed? I was reading in a book that if the dollar collapsed the banks will be not as concerned with going after collections and that might be a reason not to file now.

This was in the fiction section right?

so why should I feel bad about using the system to my own advantage as well to protect myself. You shouldn't feel bad, a BK is strictly a business decision on what is the best action to take to protect your long-term financial situation. Nothing personal about it.

Do these banks really lose anything in a Chapter 7? I'm sure they are protected by some kind insurance right? Banks do what is going to be best for their bottom line. Their business model figures in the risks they have and concludes the profit is worth the risk. Again, it is nothing personal, strictly business.

Saw a news article showing BOA taking a ~4 billion loss on mortgage lending the last quarter...but they still had ~3.5 billion to pay dividends.

Now factor in your BK and see how insignicant it is to these banks......

Tom in Colo

[Dan76]

Hello Dan76,

If I do nothing and we continue to go into an inflationary depression won't my debts just be erased with cheaper dollars as long as I'm still employed? I was reading in a book that if the dollar collapsed the banks will be not as concerned with going after collections and that might be a reason not to file now.

This was in the fiction section right?

so why should I feel bad about using the system to my own advantage as well to protect myself. You shouldn't feel bad, a BK is strictly a business decision on what is the best action to take to protect your long-term financial situation. Nothing personal about it.

Do these banks really lose anything in a Chapter 7? I'm sure they are protected by some kind insurance right? Banks do what is going to be best for their bottom line. Their business model figures in the risks they have and concludes the profit is worth the risk. Again, it is nothing personal, strictly business.

Saw a news article showing BOA taking a ~4 billion loss on mortgage lending the last quarter...but they still had ~3.5 billion to pay dividends.

Now factor in your BK and see how insignicant it is to these banks......

Tom in Colo

This was in the fiction section right?

No not really. I don't think anyone can dispute the fact that we are going through a major shift in the economy. There are a number of outcomes and I am mainly considering doing this as a hedge against anyone of these outcomes. I was being totally serious.

From my understanding and studies, in deflation you want cash, but in hyperinflation you want to get rid of it as soon as possible and invest in metals. Now my main concern was if we are heading towards hyperinflation, would debts with fixed and adjustable rates be wiped out quick? I'm sure the banks will raise interest rates to outpace the inflation rate to ensure that adjustable rate interest debts do not become a loss.

I know a lot of people are in denial about the economy, but the truth is your being bamboozled on every level and lied too by the media about what's going on. I give it a couple of years in my opinion before we see a total dollar collapse. What will happen after that nobody knows but I don't want to be stuck with unsecured debt in any outcome.

Are you saying it's all nonsense and we are on are way to a full recovery and everything will be just fine? Just curious.

[keepmine]

Stop worrying about what banks have or don't have and start worrying about yourself.
Banks have no insurance to cover defaulted creit card accounts and, they'll pursue collections aggressively-doesn't matter if we're in a deflationary or inflationary economy.

You're way overthinking this. The economy has had fluctations since time begin. Some are more severve than others but somehow someway we always pull out of and it won't be any different this time.
Take care of your own business. If you think bk is in your best interest then, that's what you need to do.

[Dan76]

Stop worrying about what banks have or don't have and start worrying about yourself.
Banks have no insurance to cover defaulted creit card accounts and, they'll pursue collections aggressively-doesn't matter if we're in a deflationary or inflationary economy.

You're way overthinking this. The economy has had fluctations since time begin. Some are more severve than others but somehow someway we always pull out of and it won't be any different this time.
Take care of your own business. If you think bk is in your best interest then, that's what you need to do.

You are right I am over thinking this way too much. I also don't want to talk to a hundred attorneys before I file. I think I've found a good one. Has really good reviews and reputation and price is very decent I think. $2100 total including attorney fees, means test, court fees, etc...

[BKlooker]

I should clarify that what i was saying was that the good folks at whatever bank, cc company, or wherever else are not going to have to start collecting cans and food stamps so they can make enough money to eat just because you decide to BK your CCs and whatever else, but YOU might.

It's about you at this point and you have to decide what's best for your future. You aren't the first or the last to go down this road (hence why we are all here ), and given the current climate, you won't be alone anytime soon. Just think of it as a small dent in your long-term financial outlook, and within a handful of years, you will be so much better off with not STILL paying on age-old debt.

Get a lawyer on board ASAP and make sure they know their stuff before getting too far down the planning process if possible.

[pikaroth]

Your story sounds exceptionally similar to mine. While not exact, it still had me thinking, "Wow, just like me" while reading your post. Just last week I decided to go the BK route, and it, too, was due to credit card debt. There is no way, not ever, that I can pay it off. About 85% of that debt comes from my mid to late twenties, and like you, I had never missed a payment, not ever. This past Friday was the first time in my life that I have missed one. No calls yet, but I know they will start.

I saw an attorney that had come recommended to me by another person who had used him, and my meeting went great (at least I felt it did), and I was advised that my BK should be very straight forward, and he further advised to immediately stop making all CC payments (as did all of the great people in this forum), and that is what I did. Day by day I AM getting over not paying, and I get sick to my stomach every so often, I realize that by February this should all be OVER, and THAT emotion is better than the negative ones I get sometimes. It is that emotion and feeling that I am hoping to build to, and I can literally only imagine how it must feel the day you get the final notice saying, basically, it's done. People have posted here how incredible it is, and I hope to share in that.

I was just making no headway as to paying down my cards. Looking at how long it would take to pay them off with minimum payments only (which I was) would be 25+ years per card, or something around that. Add to that fact I had to continue to USE the cards because I could not use cash because I was using that to pay the cards off, and reality hit me, and it hit me hard.

I wish you the best of luck with whatever you do, but for me, and for many here, BK was the way to go. At the very minimum, I can promise you that if you post any question here, you'll get answers to it within hours if not minutes. This is one of the best forums I've ever found, so welcome!

[researchnerd]

You are right I am over thinking this way too much. I also don't want to talk to a hundred attorneys before I file. I think I've found a good one. Has really good reviews and reputation and price is very decent I think. $2100 total including attorney fees, means test, court fees, etc...

How many attorneys have you personally interviewed? You don't have to talk to a hundred of 'em, but please don't make the mistake I did and pick the first one you talk to. Bankruptcy is a long and sometimes painful process; this is someone you'll be spending at least the next six months with, and partly entrusting your financial future to. It's worth making the time to talk with a few different ones.

[Dan76]

My attorney told me the same thing and that my case was pretty straight forward and would go smoothly. The other great thing is that not only can I keep the car but they can erase the negative equity in it and I would just pay the loan off based on the KBB value.

I'm 99.9% sure I'm doing this now. I'm going to open up new checking accounts this weekend.

If I stopped paying my car, how many months till repo? 3-4 maybe?

[Dan76]

How many attorneys have you personally interviewed? You don't have to talk to a hundred of 'em, but please don't make the mistake I did and pick the first one you talk to. Bankruptcy is a long and sometimes painful process; this is someone you'll be spending at least the next six months with, and partly entrusting your financial future to. It's worth making the time to talk with a few different ones.

Yeah, I'll consider this. But the price is good and the guy is well known and reputable locally from my online research.

[BKlooker]

Your story sounds exceptionally similar to mine. While not exact, it still had me thinking, "Wow, just like me" while reading your post. Just last week I decided to go the BK route, and it, too, was due to credit card debt. There is no way, not ever, that I can pay it off. About 85% of that debt comes from my mid to late twenties, and like you, I had never missed a payment, not ever. This past Friday was the first time in my life that I have missed one. No calls yet, but I know they will start.

I saw an attorney that had come recommended to me by another person who had used him, and my meeting went great (at least I felt it did), and I was advised that my BK should be very straight forward, and he further advised to immediately stop making all CC payments (as did all of the great people in this forum), and that is what I did. Day by day I AM getting over not paying, and I get sick to my stomach every so often, I realize that by February this should all be OVER, and THAT emotion is better than the negative ones I get sometimes. It is that emotion and feeling that I am hoping to build to, and I can literally only imagine how it must feel the day you get the final notice saying, basically, it's done. People have posted here how incredible it is, and I hope to share in that.

I was just making no headway as to paying down my cards. Looking at how long it would take to pay them off with minimum payments only (which I was) would be 25+ years per card, or something around that. Add to that fact I had to continue to USE the cards because I could not use cash because I was using that to pay the cards off, and reality hit me, and it hit me hard.

I wish you the best of luck with whatever you do, but for me, and for many here, BK was the way to go. At the very minimum, I can promise you that if you post any question here, you'll get answers to it within hours if not minutes. This is one of the best forums I've ever found, so welcome!

pikaroth please keep us updated on your progress. I am signing a retainer for an attorney on Monday myself, so that should get the ball rolling. And as researchnerd said, don't think that the first attorney you get is neccessarily the best, but it just might be. Mine has excellent creds, long time in business (15+ years), and the firm specializes in BKs, Short Sale, Debt settlement, etc. and has a large team of lawyers. You will know you got the right one if they are responsive when you call, allow you to ask as many questions as you need, and can both talk to you in terms you understand but also ensure your best legal interests are at heart without hiding things or playing games.

Same story here...too much CC debt accured while in early 20's plus an upside down house, and at present never paid a bill late, but struggle to find cash for basic things like food/cloths. It's a hard pill to swallow, but if someone told me a year prior that i could have gotten over this going this route, i would have been better off than i am now. I am looking forward to the freedom of FINALLY having cash savings for an emergency like a job loss, being able to afford a new car with little/no loans attached (YES!), be able to afford insurance on that car without worry, and being able to buy enough food for myself and the dog to live on without me having to go 2-3 weeks at a time on ramen and hot pockets. It’s soooo worth it!

[pikaroth]

pikaroth please keep us updated on your progress. I am signing a retainer for an attorney on Monday myself, so that should get the ball rolling. And as researchnerd said, don't think that the first attorney you get is neccessarily the best, but it just might be. Mine has excellent creds, long time in business (15+ years), and the firm specializes in BKs, Short Sale, Debt settlement, etc. and has a large team of lawyers. You will know you got the right one if they are responsive when you call, allow you to ask as many questions as you need, and can both talk to you in terms you understand but also ensure your best legal interests are at heart without hiding things or playing games.

Same story here...too much CC debt accured while in early 20's plus an upside down house, and at present never paid a bill late, but struggle to find cash for basic things like food/cloths. It's a hard pill to swallow, but if someone told me a year prior that i could have gotten over this going this route, i would have been better off than i am now. I am looking forward to the freedom of FINALLY having cash savings for an emergency like a job loss, being able to afford a new car with little/no loans attached (YES!), be able to afford insurance on that car without worry, and being able to buy enough food for myself and the dog to live on without me having to go 2-3 weeks at a time on ramen and hot pockets. It’s soooo worth it!

I will keep everyone here posted, trust me! As can be seen in my previous posts, I tend to keep people almost TOO updated.

I agree, one does not need to go with the first attorney they speak with. I won't lie and say I went to a ton, but I did end up speaking with three. I called two on the phone, and it felt off. I cannot explain it, just like they didn't care (I could have been way off on that, but it felt odd to me), and the third one is the one a co-worker used about nine months ago, and as soon as I called, they were, first of all nice, and after I advised the lady that answered the phone what I was thinking about, she put me through to the actual attorney who asked some brief questions. He then put me back with her to schedule and appointment. I went in a week later, and while there were clearly paralegals and such there, it was him I spoke with, he has been there for 21 years now, primarily does bankruptcy, and, again, a co-worker who I do trust and know fairly well, just used him and had nothing negative to say. So that is who I went with. I will say this: if something goes wrong, I'll freely admit that, too.

But yes, BKlooker, mostly CC debt from my 20s, especially after college. I just kind of travelled all over (worldwide), and almost all of it was put on CCs. That coupled with a few bigger purchases add up so quickly that when I hit my early 30s I realized I was in trouble, and I am soon to be 34, and there is no denying it or ignoring it now. I said this in another post, and I will say it again: I KNEW I was done when I had to ask my parents for money. I felt awful, humiliated. And this was not due to medical bills or anything, just that I could not make my minimum payments after I had to move.

ANYWAY, yes, trust me, I will keep everyone posted, and I hope everyone here keeps everyone posted. I come here daily just to see how other poeple's cases are going, and it gives me hope reading the threads and posts here.

Today, though, is another reason I feel great about doing this: it's my day off, and for the first time in a long, long time (this may not sound like a lot to some), but I can go see a movie and not have to get out out a CC to do so or had to save for a month to do it. I know, not a big deal to some, but for me, well, it's a little thing but it's a nice feeling.