Need some advice

[Poisoning]

Hey guys, I am working on finding an attorney to talk to when I ran across this forum. I figured I would ask you guys if you think BK could be a good option for my case.

A little background:

I am in my early 20s. Currently working 40hrs/wk at $18/hr. My total debt at the moment is around $51,xxx. That includes a truck loan from earlier this year, a motorcycle loan from early last year, both of which are majorly upside down, 3 credit cards around $1,000, $1,000, and $4,7xx, a personal loan for around $2,500, another for $3,000. After counting in my loans, and normal bills such as rent(with family - $300/mo non-negotiable) and gas to get to work/school, my debts currently spend about $2,0xx a month of the $2,200 I take home.

My savings account is $0, retirement 401k etc is $0. In a year and a half I will need to get my own healthcare, and in a month I will start paying the first student loan which is another $50 a month until next September, then will jump to $150/mo. After next September I will also be responsible for starting to pay the rest of the student loans which is another unaccounted $32,xxx.

I screwed up pretty badly thinking money was absolutely disposable and I know student loans do not get discharged which is perfectly fine if I don't have ridiculous debt in vehicles and credit cards when they start being due.

Sorry if this is badly written, just been extremely stressed lately and looking for some advice. Thank guys and girls!

[LadyInTheRed]

Hi, Poisoning. Welcome to BKforum!

You should only file BK when there is no better option. I think you may have a better option. You are young and making a decent living. You are at a point in life where your income is likely to increase. You have the advantage of low rent while you live with family. This is a great time to learn from your mistakes and develop good financial habits for life.

First, stop using credit cards and taking loans. If you don't have the cash, don't buy it.

It sounds like $38,000 of your $51,000 in non student loan debt is the car and motorcycle. I suggest you let one or both go. I bet that will free up enough cash for you to comfortably pay your credit card debt. After repossession, you can negotiate a payment plan with the creditors to pay off the deficiencies. If you live somewhere that will allow you to take public transportation, get rid of both vehicles. If public transportation is not an option and giving up one vehicle will not free up enough cash, consider giving both up and buying a modest used car. If you do that, you may want to do it before you default on the current loans so that you can get a decent interest rate.

Repossessions will damage your credit, but it will start recovering immediately as you start paying down that credit card debt.

Create a budget that pays off that credit card debt as quickly as you can. Never pay only minimum payments, even if you can only afford to pay a few dollars more. Until you get your debt paid off, spend money only on necessities and never on "wants". Include a small amount of savings in your budget. Even if it is only $5. Increase whenever you can. On payday, if you have cash left from your previous paycheck, pay it to a credit card. When your credit cards are paid off, put it in savings. There are online calculators you can use where you put in information on all of your credit card information and it tells you how to most quickly pay it off. Try a google search for "debt pay down calculator".

Hopefully, by the time you have to start paying on the student loans, you will be able to manage the payments. If not and they are federal loans, you can apply for an income based payment plan. If they are private loans, you may or may not be able to negotiate a lower payment. If all else fails, you can file BK when you know you did everything reasonable to avoid it.

Don't get me wrong. I don't believe in avoiding BK at all costs. I disagree with those who say you should get 3 jobs and work every waking moment to pay off your debt. But, if you can avoid BK on your current income by decreasing your expenses and living within your means, that is your better option.

All that said, it sounds like your income is low enough to qualify for a Chap 7. That would get rid of your loans and credit card debt. It will also allow you to keep any vehicle you continue to make payments on. But, it will also allow you to give up both vehicles without further obligations so that you can instead get something you can better afford.

[Poisoning]

Thanks for the response Lady! I have been thinking about all options deeply over the last few days. Tomorrow I am meeting with an attorney in the morning to further discuss options. Once I have decided which way to approach everything, I will update!

[leonel9]

I agree with LadyInTheRed's advice. It seems that you should have options to deal with the $20k in "regular" debt, as well as the $32k in student loan debt. I'd like to add: Consider that not all attorneys are great attorneys. The first one I met with immediately suggested a Chapter 13 plan without analyzing my finances/means test calculation. He was also unaware that I had to use a different state's exemption list though I told him I moved to the state 5 months prior.

My point here is that if you decide to meet with bankruptcy attorneys, get a few opinions. One may try to push you in one direction, while another may suggest an alternative that may be better for you (such as what LadyInTheRed is suggesting).

[Poisoning]

Thanks for the advice ladies and gents. I did meet with multiple attorneys and spoke over options. After time thinking about it, I did decide to go with the Chapter 7, which was advised to me multiple times. I will be signing and filing in less than 2 weeks. I will keep updated on what happens! Thanks again all!

Lawyer paid, small price for big relief.

[Poisoning]

Happy to report that I received my discharge papers on 3/20/17! Only debts left are school loans of course, which I am happy to keep paying. 50k discharged, and the stress is gone.

[leonel9]

Congratulations!