Question File Bk or debt restructure

[wender]

Hello-
I just talked to a lawyer today and the outcome of filing BK seems pretty grim. He said that the way creditors do business following a BK has changed in the past 2 months.

It used to be that creditors would approve credit knowing you can't file for another 8 years.

I'm in the process of getting divorced, I'm going to nursing school and will not be done till 2012. I have very little income. I will probably keep the house and the vehicle is paid off.

Long story short, I have no family where I live now. I just want to finish school, sell the home and move back to the state where my family lives.

I'm a broke student and will not have a decent income till I'm done...the nursing profession is strong and I shouldn't have any problems finding a job anywhere I go.

My concern is whether or not I'll be eligible to purchase a home in the next 2-3 years or if I'd be eligible for a car loan.

I'm wondering if I went the route of debt re-settlement. I have a legal plan with my work and there is a paralegal who will contact all the creditor and try to strike a deal to pay off the debt. Negotiations take about 6-12 mos. The pit fall would be that I'd have to immeadiatley come up with amount they settled on and pay taxes on the remaining forgiven debt. The only way I'd be able to pay off the settled amount is if I take a loan against my 401k...I'd pay myself back. I may benefit from doing this now since my income is so little, I doubt this will have little impact on my taxes.

I guess my final question is.....would my credit rating be better off if I sell it....or would it be practically the same if i just file bk?

Any advise would be appreciated.

Thanks,
Wender

[HHM]

he only way I'd be able to pay off the settled amount is if I take a loan against my 401k

That pretty much answers your question there. DON'T DO IT. Go with the 0% payback and file BK. Any other option would be stupid. Your concerns about future credit are more based on myth then reality. You will be able to finance a car with in months of filing BK. You will be able to get a mortgage within 2 years. Debt settlement is just as damaging on your credit report as BK. So you wont be able to do any of those things any faster by going debt settlement. Thus, don't waste your money on it.

[Depressed]

As I've looked into both, I actually found that debt settlement could possibly be worse. A friend of mine that use to sell cars could get someone with a Banruptcy financing almost immediately after discharge, while those with charge off/settlements couldn't be financed for a year or more.

[wender]

As I've looked into both, I actually found that debt settlement could possibly be worse. A friend of mine that use to sell cars could get someone with a Banruptcy financing almost immediately after discharge, while those with charge off/settlements couldn't be financed for a year or more.

the bk lawyer that I talked with told me that creditors aren't giving credit at all...it used to be that they wouldn't wait...but now everything is changing and he has no idea how filing BK will affect your credit. Do you know anything about that?

My other option would be to see if I'd qualify for an equity loan and then i'd pay back that way too. I'm not sure I'd qualify for a loan given that I have very little income and no a bad credit rating. What really sucks is the soaring rates of interest these people are charging the card...anywhere from 250- 350 extra amonth. that is just criminal.

[HHM]

Wender, face the fact that if you really want to resolve this debt, it is most likely going to be a BK. That attorney was just trying to deal with your "objection" to moving forward, if no one can get credit, then bankruptcy isn't going to be bad for you.

The reality is, people are getting credit as they normally would. Most people are getting credit card offers in the mail within 3-6 months of filing bankruptcy. Current mortgage guidelines are 2 years from bankruptcy for FHA mortgages.

[hindsight]

You don't have to own a house.

I have owned my own home since I was 25.
Now some 20 +/- years later, after doing a short sale. Should have just let it forclose or strip the 2nd. Wish I knew then what I know now!

Anyway we are renting and this is our 2nd year doing so.

If lease is not renewed we move to another house.

Just a thought, don't worry about buying until you are in a long term job. With the market now and future, it's safer to rent anyway.

[LimpDisc]

the bk lawyer that I talked with told me that creditors aren't giving credit at all...it used to be that they wouldn't wait...but now everything is changing and he has no idea how filing BK will affect your credit. Do you know anything about that?

My other option would be to see if I'd qualify for an equity loan and then i'd pay back that way too. I'm not sure I'd qualify for a loan given that I have very little income and no a bad credit rating. What really sucks is the soaring rates of interest these people are charging the card...anywhere from 250- 350 extra amonth. that is just criminal.

Don't use home equity to pay back unsercured creditors. It's crazy to turn unsecured debt into secured debt!

Your BK lawyer said their not giving credit at all? Read the sections on this forum for car & mortgage loans after BK. There is credit life after bankruptcy.

[AngelinaCatHub]

Wender, you have had excellent advice here from all.

Sacrificing your future by a loan from the 401k is a sure thing you will not pay it back. ( know from personal).

To screw around with your house would be foolish.

My opinion is: you have a stigma of bankruptcy. We are and have been in your same situation. When you come to the realization that bankruptcy is a business decision and not to be shameful for. As far as dealing with debt consolidation companies, you will always come out losing in the end.

You are truly a classic example of a person who need relief and desearves it and I am sure you would use your "new start" wisely.

We once had a bit of wealth. Lost it all and Mrs. and I have never been happier. We learned, we got relief of worry, and finally peace. Oh yes it is still tough and I have flash backs of spending money for anything I wanted. Now I spend money for only what I NEED. You will be fine. 'Hub

[ForumReader]

I agree with the above posts. As far as debt settlement companies go, I have mentioned this in my earlier posts to posters who have considered going the debt settlement company/service route, to STAY away from any even the best debt settlement company to settle your debt. Simply not worth it. I was painfully scammed by one of these companies. Wishing you good luck with your situation and bk if you decide to file.

[wender]

thanks for all the great advise...I'm leaning towards BK. Before I take such a huge leap, I want to make sure that I make an educated decision and weigh out my options....I don't want to look back with regrets...I'm sure you all understand.

since I'm going to school and I make hardly anything, I wanted to have something to lean on in case the house needed some repair. It's a newer home...so I'm crossing my fingers all will stay well till I graduate. But for just in case moment...it'd be nice to tap into the equity I have on my home (if I have any)...for safety net. Just wondering if I'd have any trouble with that if I file BK?

[keepmine]

It's one thing to use home equity to repair a dwelling. That'll cause no problems.
Where the problem arises is, you tap the heloc and have many thousands in cash in the bank and file bk. If your state does not have a high enough exemption for that cash then, you lose it. There's also the risk of poor financial management. Using the heloc to pay everyday expenses or even worse, paying cc debt.
Two good rules that all newcomers to this site need to brand on their forehead.
1. Don't turn unsecured debt into secured debt.
2. Don't take an exempt asset and make it nonexempt.This is the rule you're about to violate. Right up there with cashing out retirement accounts.

[bkpain]

You have to do what is right for YOU. Read some more through out the forum and you'll see stories of success for buying a home and a car again. I asked these same questions when I went to a free consult and the lawyer said that most people it takes about 2 years of "working the system" to get there credit score back but if your a doctor or a lawyer your credit score is back in a little as 60-90 days. That really excited me because my hubby is a small town doc but we have decided to file separately. Not sure if the same would apply for a nurse or not.

[wender]

It's one thing to use home equity to repair a dwelling. That'll cause no problems.
Where the problem arises is, you tap the heloc and have many thousands in cash in the bank and file bk. If your state does not have a high enough exemption for that cash then, you lose it. There's also the risk of poor financial management. Using the heloc to pay everyday expenses or even worse, paying cc debt.
Two good rules that all newcomers to this site need to brand on their forehead.
1. Don't turn unsecured debt into secured debt.
2. Don't take an exempt asset and make it nonexempt.This is the rule you're about to violate. Right up there with cashing out retirement accounts.

I would only use equity to put back into the house in case of an emergency or to prevent an emergency...like replacing siding, etc. I was just wondering if I'd qualify for a heloc after filing bk...and would only apply for a heloc after filing bk...not before.

[wender]

You have to do what is right for YOU. Read some more through out the forum and you'll see stories of success for buying a home and a car again. I asked these same questions when I went to a free consult and the lawyer said that most people it takes about 2 years of "working the system" to get there credit score back but if your a doctor or a lawyer your credit score is back in a little as 60-90 days. That really excited me because my hubby is a small town doc but we have decided to file separately. Not sure if the same would apply for a nurse or not.

Well..I have to pass nursing school....so if I do, then I hope you are right. Thanks for the advise.