Magic Forumula

[Dinero]

Does anyone here know what is the magic formula whereby you can determine if you should file for bankruptcy or try to settle with your creditors instead or some other option?

I have been talking some attorneys and they say if I am going to do it, I should file chapter 7 instead of chapter 13. So okay, I know the route to take if I am compelled to take the drastic step, but how do you know if that option makes financial sense given all the variables involved in anyone's particular situation?

Let's say I don't want to file bankruptcy, because it seems like jumping off a cliff and your credit score plummets with you and then it takes 10 years to crawl back up to where you were.

Who do you talk to in order to help you decide this important question rationally without the emotional turmoil you feel at the mere prospect? If you talk to a bankruptcy attorney, he will advise you to file bankruptcy. If you talk to a credit counselor he will advise to set up some payment plan which could also take years to resolve and you may pay through your nose.

Do we have any objective veterans here that might provide some insight and suggest what sort of professional I should consult to determine if I should declare bankruptcy or keep trying to settle with my creditors?

I've been trying to settle with my creditors and one offered a generous settlement which I accepted, but another one has just sent a thuggish processor server over to serve me with a law suit. Ugh! Now, the clock is running and I have 20 days to act!

I need to stay cool and make wise decisions on how to extricate myself from this financial predicament. I don't have the cash to pay an attorney so I would need to file on my own which adds another layer of difficulty, but my gut says I should fight my way out of this. However, I think a wise decision here should be more of a purely financial decision than an ego determined action.

[scorpion35]

Does anyone here know what is the magic formula whereby you can determine if you should file for bankruptcy or try to settle with your creditors instead or some other option?

I have been talking some attorneys and they say if I am going to do it, I should file chapter 7 instead of chapter 13. So okay, I know the route to take if I am compelled to take the drastic step, but how do you know if that option makes financial sense given all the variables involved in anyone's particular situation?

Let's say I don't want to file bankruptcy, because it seems like jumping off a cliff and your credit score plummets with you and then it takes 10 years to crawl back up to where you were.

Who do you talk to in order to help you decide this important question rationally without the emotional turmoil you feel at the mere prospect? If you talk to a bankruptcy attorney, he will advise you to file bankruptcy. If you talk to a credit counselor he will advise to set up some payment plan which could also take years to resolve and you may pay through your nose.

Do we have any objective veterans here that might provide some insight and suggest what sort of professional I should consult to determine if I should declare bankruptcy or keep trying to settle with my creditors?

I've been trying to settle with my creditors and one offered a generous settlement which I accepted, but another one has just sent a thuggish processor server over to serve me with a law suit. Ugh! Now, the clock is running and I have 20 days to act!

I need to stay cool and make wise decisions on how to extricate myself from this financial predicament. I don't have the cash to pay an attorney so I would need to file on my own which adds another layer of difficulty, but my gut says I should fight my way out of this. However, I think a wise decision here should be more of a purely financial decision than an ego determined action.

if u don't have the money to settle u should file bk.2-3 months after u stop paying the banks will start offering settlements but u will need cash
6 months after u stop paying your credit cards u will get sued(more than likely)
only u can decide

good luck

[brokejoker]

Only you can decide for you. For US it was a matter of a ton of outstanding debt that was just multiplying with interest and fees. The money we could scrape together to make payments was just like throwing spitballs at a battleship. When we got served we really had to face facts and the fact was we couldn't live with the debt we had and when they got a judgment against us and garnished wages we definitely couldn't live on 25% less take home pay than we had. Even if we liquidated all our assets and moved to an apartment we still wouldn't be able to pay back all our creditors so it was either live this way for the next decade or take the leap and the fresh start that BK had to offer and live within our means for the next decade without all the stress and threats from collectors.

Funny thing about our credit scores, we started getting credit card offers for half what our default rate was with our BK cards. We're not even discharged and I have collected 8 CC offers so far. My favorite was the one that told me I "earned" a card with them and that the card comes with a 0% interest rate for 12 months. LOL

[free2breathe]

I looked at it like this: We were unable to pay our bills due to circumstances beyond our control (job losses, forced to move to find a job). We could have scratched and clawed, but let's face it, once you can't pay those bills, the credit rating starts dropping. Then you have a medical emergency that results in three separate surgeries....insurance pays their part, but there are high out-of-pocket limits. Can't pay the medical bills, they go to collection within 6 months...there are a few more hits to the credit scores. So, facing those obstacles, is it better for us to drag it out, ruining the credit along the way and still not being able to make a dent in the debt? Nope, in our case, it made more financial sense to suck it up, admit we were in over our heads, and file. Yes, the bk stays on your record for 10 years, and no, it's not a comfortable feeling. BUT...you can start rebuilding credit soon after your debts are discharged. In the end, we'll be better off sooner for taking the bk route. That's my story, and I'm stuck with it

We filed pro se....didn't have the $1500 to hire an attorney, and we have no assets to speak of, so it worked for us. It's all a very individual process.

[BKlooker]

I wouldn't let the "credit score" issue hold you back from filing either way. From what you described, your credit is probably already not the highest in the land, and if you continue down the road you are going, it's going to get worse anyway. Why not take a 1 time hit, and start fresh? You don't really "need" credit but for a handful of life's instances, usually involving real estate and cars, and occasionally a new job depending on what you do for a living. Otherwise, who cares? It's not going to be carved on your tombstone.

In my humble opinion, it really depends on what else you got going on. How much debt are we talking here and what kind? Do you want to surrender any item (car, luxury purchases, house, etc.)? If we are talking ONLY cc debt in a relatively small amount (say less than 50K) and nothing else, then maybe debt settlement is an option, but it's still going to knock your credit. Don't forget you will likely have to pay taxes on that money if you go that route. Also, you don't want to get in a situation where you debt settle and THEN file BK somewhere down the road before that's paid out....then you are going to be even worse off.

With BK, it's not up to the creditors how much they settle for and you may very well get a much better settlement out of it if it's a CH 13 than you would going it rogue with each creditor. Of course if it's a CH7 then it all goes away right there . In addition, you get the other perks of not having to worry about harassing phone calls, and it's really the trustee who does most of the sorting out rather than you, once you file your expenses and such.

If i were you, i would strongly consider talking to a local non-profit credit counseling service ASAP. The are generally free for initial consultation and can review your overall situation and tell you what your options are from there. IF BK becomes the best option for you, do consult with an attorney for free (most do the first consult free) just to see what's up. You might not have cash for an attorney right this minute, but mine took just a $500 retainer and said i could pay the rest prior to filing anytime....if you aren't using cash to try to stay afloat on your bills for a month or two, that should likely more than cover it...

While there is no 1 right or wrong way to approach debt, there are more graceful ways, and ways that add up to a better future in the long run, and then ways that only prolong the inevitable.....Just my 2 cents....

[tcreegan]

Hi dinero,
Who do you talk to in order to help you decide this important question rationally without the emotional turmoil you feel at the mere prospect?

BKlooker has great advice....I would add that you have to take a class b4 filing a BK, so look up that non-profit credit counseling agency and sign-up for that class (assuming they offer it, has to be approved by the BK court) and ask lots of questions. Here you are dealing with a non-profit so they don't have any stake in what decision you make. We used Consumer Credit Counseling of [state] and despite the 'credit counseling' in the name, they gave us great information, helped us work the numbers both ways to see what would be the best way to go.

it seems like jumping off a cliff and your credit score plummets with you and then it takes 10 years to crawl back up to where you were

If you are being sued and settling cc debt your score has already plummented. The Bk will decrease your debt-to-income ratio and some simple credit rebuilding will get your score up in no time, couple years and you will pass where you are now...

And as BKlooker said, it also depends on your income, your assets, house, car, what they are worth, what you owe on them...

Texas median income for a Ch 7 is $3140 monthly (household of 1), are you somewhere close to this?

Texas also has some nice exemptions allowing you to keep a lot of property from the BK

And all this should be covered in the credit counseling class required for a BK....

If you are going to go pro-se, you need to get the NOLO book, a step-by-step BK guide. www.nolo.com

Then you go to your BK courts website to download the forms to see if they are different than the NOLO forms. Later you go to the courts website and find the 'local Bk rules' and read them.

[BKlooker]

And one more thing, it will NOT take you 10 years to "crawl" back up to where you were. There are people on here who get offered 8+ credit cards (with medium to high interest rates) within the 90 days it takes the BK process to go underway and secure a new car note 2 days after discharge (also at a high interest rate, but still there).

I have done lots and lots of reading on this forum....if you secure a CH 7, and are generally diligent with paying your expenses, there is little reason to think that you won't have a decent enough score within 2-3 years, tops. Some on here report to having a score back up in the high 600's less than 6 months after it's all done. You won't hit 800's, but you can get to an acceptable range pretty quick. Even if you get knocked to a CH 13, at least you have 1 monthly payment that gets taken out for you, and that's it, no worries from there and no harassing calls, etc.

BK can be a really positive thing in the end (and is ultimately suppose to be). Living paycheck to paycheck and relying on ccs to pay everyday expenses is emotionally stressful....having the car break down, your wife get sick and you are stuck with a $2K hospital bill you can't pay and have maxed out cards is emotionally battering...having ample cash on hand for all your life's expenses, plus 3-4 months savings in the bank for emergencies, and NOT needing to use ccs for anything anymore but having a crappy credit score for a year or so (again, who cares?!) is probably a heck of a lot more calm a state to be in than you are now!

I was just like you...i was originally wanting to short sale my home for many reasons...upon looking over my file with a short sale attorney, he told me I would be stupid not to try for a CH7 given the other debt loads, cause my credit would take a hit anyway so why not try to wipe the slate clean all together? Once i got over the initial shock of considering bankruptcy, it makes a lot more sense than floundering along until i eventually have to anyway and by then under a lot more grief. Whatever you choose, know you aren't alone...it's so not the end of the world.

[Dinero]

Unknown Waters

Thanks for all your valuable information, friends.

Right now, more than ever, I must think with a clear head, but getting hit with a lawsuit ruined my sleep last night.

If I do file chapter 7, I will probably have to do it on my own and I just bought the NOLO book that was recommended on this forum to help me navigate these unknown waters.

Just having to deal with the emotional upheaval of filing bankruptcy will rob you of your tranquility, but I suppose you just have to grit your teeth and do what you have to do.

[Freddy03]

I wouldn't worry too much about your credit score. The judgement is going to take care of that.....lol I tried for almost 2 years to settle w/ creditors while fighting multiple lawsuits. It seemed like once I received one summons I was quick to get 2 more within 30 days. I wish I never waited. I am now in the planning stages of my BK and hope to file within a few months.

Good Luck to you

[free2breathe]

Thanks for all your valuable information, friends.

Right now, more than ever, I must think with a clear head, but getting hit with a lawsuit ruined my sleep last night.

If I do file chapter 7, I will probably have to do it on my own and I just bought the NOLO book that was recommended on this forum to help me navigate these unknown waters.

Just having to deal with the emotional upheaval of filing bankruptcy will rob you of your tranquility, but I suppose you just have to grit your teeth and do what you have to do.

Check out the pro se section of the forum as well. You'll find a lot of information, experiences, and people who know how it feels to go through what you are going through.

[keepmine]

You've gotten some great advice already.
All I can suggest is, treat this as a business decision and try and keep your emotions in check.
Act in a manner that you perceive to be in your best interest. You can be certain that is what all of your creditors are going to do.

[Dinero]

Jungle People

I don't understand why these creditors can be so unreasonable. I explained the situation and told them that I was willing to settle with them for a portion of the total cost, but if I was forced into bankruptcy then they would get nothing.

So what do they do?

They sue me! I don't understand the logic of that. Don't they realize that the economy has been in the toilet?

Why can't they see the fundamental logic that half a loaf is better then nothing?

An attorney that I consulted with told me that bill collectors were basically sadists.

He said when you try and explain to them and they can sense the stress in your voice then it's like giving them chocolate ice cream!

He said they love that and you need to talk to them in very forceful tones if you speak to them at all!

. . . It's a jungle out there, guys!

[ForTheBest]

. . . It's a jungle out there, guys!

That it definitely is. The trick right now, though, is not to get stuck in an emotional jungle "in" there. Lawsuits, possible bankruptcy, unfairness, fear of the future and the unknown, feeling stuck between a rock and a hard place, feeling the world fall out from under you... it's all very scary stuff, at least at the beginning. And anybody who tells you it isn't is lying. I don't care how objective or professional they seem.

You've gotten some great advice on here. Now you just have to give yourself some time to digest it all and then you'll come up with the right solution for you. You truly will. And no matter how horrible any of the prospects seem right now, none of them will turn out to be as bad as you imagine they'll be. You have my word on that one. For right now, tonight, just grab a branch and hold on. And don't forget to breathe.

[kartoons19]

I agree with what everyone has said. When I realized that my only choice or at least the one that gave me a shot at recovering was to file bk, I actually felt relieved. I should be receiving my discharge any day now and I can tell you that the hardest part was before filing. I don't feel like I jumped off a cliff at all. Yes there may be some challenges with a bk, but nothing compared to what I was dealing with before I filed. Of course, no one ever wants to be in this position, but at least there is an opportunity for a fresh start.

I'm not sure if it has been mentioned, but when you settle with a creditor you may be taxed on the difference. I don't know the specifics since I wasn't in that situation, but it has been discussed many times in this forum. Ultimately you have to decide to do what is best for you. Usually if I have a tough choice to make, I take some time to get quiet and see which option feels right. If you decide to file, try to think of it as a business decision. After all, many businesses file for bk only to come back and thrive. Good luck to you whatever you decide to do.

[tcreegan]

Hi all,

Why can't they see the fundamental logic that half a loaf is better then nothing?

Falls under my brother Eds law: Never attribute to malice that which is easily explained by incompetetence