Might be spared from BK, what next?

[keitheii]

So a family member came forward and offered me money to pay off my creditors so I can avoid bankruptcy since it seems my 7 was kicked back by the court. I'm trying to decide how to proceed from here... I'm waiting to hear back from my atty but his advice has been less than useful and doesn't seem knowledgeable or willing to give advice on which actions are better for rebuilding your credit report.
1: Besides my car, I owe about 17K or so in unsecured debt. I'd like to find some way to negotiate this down and pay it all off at once.
2. I'm concerned about which action will hurt my credit report more; paying off all the creditors and keeping all the delinquencies and lawsuits /judgments on my report or changing my 7 to a 13, then paying off all the creditors so all of that disappears off my report but the bk itself. (I don't qualify for 7 according to the court)

Anyone have any advice for which way to proceed under the circumstances?

[justbroke]

1: Besides my car, I owe about 17K or so in unsecured debt. I'd like to find some way to negotiate this down and pay it all off at once.

If they are separate creditors, you will need to negotiate separately. In my experience, a creditor will not negotiate with you when you are able to pay them, or in full. You may need to wait for the debt to be sold to a junk debt buyer (JDB) whom may then offer a deal.

2. I'm concerned about which action will hurt my credit report more; paying off all the creditors and keeping all the delinquencies and lawsuits /judgments on my report or changing my 7 to a 13, then paying off all the creditors so all of that disappears off my report but the bk itself. (I don't qualify for 7 according to the court)

Your credit is toast. The moment you filed, you put a mark on your credit report for 10 years (because you filed a Chapter 7). From what I have read, the "court" has not ruled on your Chapter 7. It's only the Trustee or United States Trustee (UST) that is "saying" that you could afford to return a meaningful premium to the unsecured creditors through a Chapter 13. So at this moment, you are a Chapter 7 unless and until you convert to a Chapter 13. (A Chapter 13 stays on your credit report for 7 years.)

I may get flamed for this, but here it goes. Do not let your "credit report" or "credit history" drive this decision. There is nothing more DEFINITE about dealing with debt than a bankruptcy. It deals with all debt and has finality for the debtor. There is no way to gauge if a creditor will negotiate with you or seek to win judgments against you. Judgments are bad for the sole reason that they can be renewed, in most States, for up to 20 years. Bankruptcy is the only thing to bring such finality and, basically, puts you in the drivers seat when it comes to dealing with creditors.

I'm sure that if you asked anyone on this board, that had to go through a Chapter 13, if they could accomplish the same thing and go through a Chapter 7 liquidation instead, every single one of them would opt for the Chapter 7.

Many bankruptcy attorneys are not going to provide you with credit counseling. There is a fine line there. With bankruptcy, it's not about your credit report. It's about dealing with mounting debt while you are insolvent.

If what I wrote is what your attorney (basically) told you, then I apologize for being less than helpful.

[LadyInTheRed]

My first piece of advice is to consult with another BK attorney or two before you make a final decision. You have lost faith in your attorney for a good reason.

You already filed BK. It will be on your credit reports whether you continue with it or not. Your history will not disappear from your credit report whether the debts are paid in full or discharged. What is there now will stay there until it has been there for 7 years. If your BK is dismissed without discharge, there will probably be further negative entries between the time the case is dismissed and the time you pay off your debts.

Trying to settle with all creditors is a risk. There is no guaranty they will all settle. In fact, based on what I have read of the experiences of others, you would be lucky to get all creditors to settle. You may settle with some, but still be left with the entire amount due on the others and find yourself needing to file BK anyway after having thrown away the money paying off dischargeable debt. Also, if you become solvent after some of the debt is paid off, the forgiveness of debt will be taxable income. So, if you go that route, make sure you understand the tax consequences and have the money available to you.

Is the family member offering you a gift or a loan? If a loan, I would highly recommend bankruptcy instead. Being in debt to family is still being in debt. If a gift, I still recommend bankruptcy instead. Delay the gift until after you file and use it to help you get through a Chap 13 or to help you in your fresh start after a Chap 7, which is what I really think you should do. But that was covered in the other thread and I won't say more about it here.

[LadyInTheRed]

LOL, JB. We've been doing a lot of typing at the same time lately.

JB's post is spot on, as always.

[justbroke]

LITR, we are always writing novels!

keitheii, let me be clear that I'm not saying that bankruptcy is the "right" situation for you. I'm just writing that it is a tool which is available that can provide finality. You have many questions and concerns and they all seem to point to you trying to find some "finality" with this debt issue. Forgetting about your actual credit, because it's toast at this point, you have to weigh the "value" or paying off $17K+ in debt with using the bankruptcy tool.

It's a financial decision, shouldn't be taken lightly, and you really need to do the math. You need to figure out the cost of money by taking $17K from relatives -- especially if they're stealing it from their future -- versus being able to discharge the same amount while experiencing the small discomfort of a bankruptcy. It's both a personal and financial decision. I just keep "hearing" that you're having second thoughts about this yet are still trying to fix the debt issue.

[Drazil65]

"I may get flamed for this, but here it goes. Do not let your "credit report" or "credit history" drive this decision. There is nothing more DEFINITE about dealing with debt than a bankruptcy. It deals with all debt and has finality for the debtor. There is no way to gauge if a creditor will negotiate with you or seek to win judgments against you. Judgments are bad for the sole reason that they can be renewed, in most States, for up to 20 years. Bankruptcy is the only thing to bring such finality and, basically, puts you in the drivers seat when it comes to dealing with creditors."

I agree 100%....

JMHO...owing a relative or friend (or anyone for that matter but especially a relative or friend) is so much worse than filing chapter 7, no matter what the person offering the gift says, the strings attached will be long reaching and stifling. I am sure people are trying to convince you that bankruptcy is the worse thing in the world blah, blah, blah...no my friend, receiving money or borrowing money from someone you know is way worse as you will see a side of people that you had no idea existed...filing and being done with it and making that decision on your own will be your only way to accept responsibility and move on with your life.....yeah, way worse...Good Luck!!!!

[justbroke]

Drazil, you remind me of what my brother once said to me. As a teenager, I asked to borrow money to purchase something. His response was "I'm not loaning this money to you because you're my brother. I'm loaning this money to you to determine whether you're a future credit risk." He was testing me.

If you want to know the true nature of how much a relative or friend cares about you, borrow money from them and don't pay any of it back. You may see a side of them that you never expected.

(I'm not saying that will be your path keith. I just thought it was an interesting expression.)

[keitheii]

Thanks for the replies everyone. I'm going to confirm this with my family member, but I believe it will be a gift. My debt is about 17K, they said they can give me up to 15K since anything more they'd have to report it and I'd have to pay taxes on it. (Not sure if that's accurate, didn't check that yet).. You're correct, the bankruptcy trustee contacted my lawyer and said certain expenses he listed can't be counted on the means test since they're too high for a single person and supporting my girlfriend doesn't count.. so he's going to consider the difference as dispensable income and with that being the case, in his eyes I've failed the means test. With that being said, he said my choice is to either convert to 13 or try to settle with creditors. Since my credit has the BK on it already (I didn't realize that until now), I feel like I should just carry though with it.. Though if I do, it looks like I need to convert to a 13.. and according to my atty based on my income he feels the court will make me agree to a payment plan plus 10% that pays back most if not all of my debt.. so he thinks I might want to try the settlement angle since he usually gets 50-80% settlement offers.

I'm waiting to hear back from him, I'm going to call tomorrow to get more info after his research today. I was told he was consulting another attorney himself for a 2nd opinion.. I could do the same, but I"m concerned they won't be able to tell me much without reviewing my finances.. and that doesn't come for free.. and I can't afford to pay another atty when I already paid this one in full.. $2500..

[justbroke]

It reads as though you have become familiar with the process and understand the various options. I did not know that your bankruptcy attorney also does debt relief as well and may be able to help you with that process. Beware of those debt relief "agencies" that take a portion of the settlements.

[AngelinaCat]

I'm waiting to hear back from him, I'm going to call tomorrow to get more info after his research today. I was told he was consulting another attorney himself for a 2nd opinion.. I could do the same, but I"m concerned they won't be able to tell me much without reviewing my finances.. and that doesn't come for free.. and I can't afford to pay another atty when I already paid this one in full.. $2500..

Even if you could afford another attorney, you can't just 'fire' him. He is the Attorney of Record, and will remain so until your case is finished one way or another, OR he petitions the court to have himself removed as your attorney, or YOU petition the court to have him removed as your attorney and substitute another person. You can be that person if you feel confident enough to proceed pro se.

[LadyInTheRed]

Just to clarrify a bit, if the debtor wants to fire an attorney, it is not necessary to petition the court. You really just inform the court by filing the substitution of attorney. If the attorney wants out, but the client doesn't want the attorney out, then the attorney must file a motion.

[keitheii]

Just to update on this thread... The money was actually a gift, not a loan. I was able to settle with all my creditors for 50%, some less.. With the accrued interest at the time I did this, I owed $18.5K. I was able to settle for $9K total. I know I'll have a big tax bill next year, but according to my attorney if I did chapter 13 he was pretty sure they'd make me pay 100% of what I owed *plus* trustee fees. I checked with another attorney who agreed with his assessment so I went with the settlement. I paid everyone off 2 months ago. Today I got a pre-approved capital one app with no application or annual fees.. and was approve for $2k. I was very surprised. Needless to say I won't be using that card to buy anything.. other than something small each month and pay it off just to establish a payment history. My credit score is now 602... It was 780 2 years ago.. so hoping to rebuild it... not sure if this will help or not..

[LadyInTheRed]

Congratulations keitheii. I am glad the settlement worked out for you.

Is that credit score from FICO?