Consumer Credit or Chapter 13, what's best for me?

[bigstick]

I have about 60k in CC debt and another 1k in medical bills. I've been up to date but have now fallen behind and about to miss my second CC payments in a row. Now that each of my cards have gone up to 29.99% I just can't make that full min payment. I've contacted my local CCCS and it seems as though they can reduce my monthly minimum payment amount by about $500. I've spoken to a couple attorneys about bankruptcy so I know those options as well. I can not qualify for chapter 7 but I know that my pay will be decreasing in May and come this time next year more then likely i'll be able to show 6 months at a decreased pay rate and qualify.

I have about 10k in tax returns coming to me in a couple weeks which I could use to catch up on my CC payments. Should I attempt to go with the CCCS and hope to make the payment and just wait a year and re-look at filing chap 7 ? Or should I spend the tax return on an attorney's 2500-4500 fee for filing chap 13 and save an additional couple hundred per month? CCCS payment will be approx $1150 and Chap 13 payment anywhere from $600-900 per month. I've been told by both attorneys that I can convert from 13 to 7 this time next year if I have the decrease in pay.

Thank you for all your help!

[Flamingo]

You cannot base filing BK on events that you believe will take place in the future (i.e., income loss, income gain, job loss, etc., etc.). When you file BK, it is based on what your circumstances are at the time of filing. In your situation, you need to weigh out exactly what you want to do against your present situation, your debt load, your cash flow and those income tax refunds.

CCCS is just as bad on your credit reports as filing BK. In a Chapter 13, your accumulating interest is eliminated as of the day of filing wherein if you go through a company like CCCS, your interest is lowered but not eliminated.

You will need to simply weigh out your situation as I state above as it appears you already have received some compentent legal advice.

[bigstick]

I've heard mixed stories as far as how bad CCCS vs chap 7 vs chap 13 is on your credit report. I'm not too worried about my report as long as I can still get credit if need be in future years, which it sounds like is possible in any case. One attorney warned that CCCS is just as bad if not worse since it will show on your report as late payments and you are in the plan for 5 years. So during those 5 years everything will show as late payments.

[HHM]

There is nothing inherently wrong with CCCS, its just that by the time people realize they need help, the CCCS option is no longer the best choice.

The attorney is correct, odds are you will see late payments on your credit report and the comments section on each account included in the CCCS program will reflect so; which is a a negative on your credit report.

The other things with CCCS are that it is ONLY for credit cards. If you have other types of debt that need resolving, CCCS cannot help. Also, all CCCS programs require you to pay the debt in FULL over 5 or less years. The benefit is that the CCCS agency gets the avg interest rate to 3-6 percent, but over 5 years, that means you are paying back 130% of the balance owed at the time you enter the program. Since most peoples problem is cash flow, CCCS rarely works long term because the payment required is often not much different than the minimums you are already paying. Thus, if you are struggling with the minimum payments, CCCS does not provide relief.

A chapter 13 is where you pay back what you can afford to pay back; any amount of debt unpaid in the chapter 13 is discharged. The big difference is that a payment in a chap 13 is based on your income and expenses, in CCCS, the payment is solely based on the amount needed to pay off the debt, in full, in x years. Also, chapter 13's can address other types of debt.

In your case, if the chapter 13 payment will be less, the decision is really a no brain-er; you stand a better chance at succeeding with a chapter 13 than you do with CCCS.

[bigstick]

Thanks for the info, I think i'm on the same page, chap 13 seems to be the best since even though i'm forking out $2500-$4500 up front in attorneys fees it will be less in the long run.

Another question, how should I handle my automobiles?? I have two cars, one old clunker that is worth nothing and I owe nothing. One 08 which I am way upside down on from losing my butt when trading in my last car. Both attorney's said I could give up that car and then I wouldn't have to worry about being so upside down. Is that a smart move? I've also read about how you can re-work your auto loan in a chap 13? I'm very confused about that part.

[Meatstick]

If your way upside down then there is really no point in keeping the vehicle and the payment that comes with it. You may be able to do a "redemption" but you will still have a payment to deal with.

If your second hand vehicle is road worthy I would drive that into the ground and save the $$$ from not making payments as savings for a new post-BK vehicle.

I am driving around a '99 Chevy Z-71 with 200k miles on it. Although I would like to have something newer I find it more financially beneficial to spend a meager amount on maintenance and keep the truck until it craps out.

No high dollar payments, no full coverage insurance and it feels good !

[keepmine]

In a Chapter 13, if you've owned the car for over 910 days then, you can cramdown the loan amount to the current value of the car.

[bigstick]

I've only had it for close to 2 years so wouldn't be but maybe 700 days so far

[HHM]

Let's back up...the 910 day rule only applies to the the amount to finance the "purchase price" of the vehicle. If you rolled in negative equity from a trade in, extended warranty, tax title etc, you can cram down those parts of the loan before 910 days. You may want to track down your original paperwork from the car deal and see how much "extra" expenses were included in your loan. You may be able to do a partial cram down.

[bigstick]

yeah i'll have to find my paperwork to see how it was written up on the bill of sale. I think I was 4-5k upside down on my trade in. I'm assuming they added that extra monies to the sale price of the new car which I wouldn't think would help me i

[klandsb]

bigstick.... Go for the Chapter 13... I was in a debt settlement company (which isnt the same as CCC ) but just from my experiences at least a BK stops all interest & late fees on your credit cards. Also they get a % of what you owe them with pmts spread out over the 5 yrs. Of course this depends on your income vs expenses.
Also, a big plus is the attorney fees can be added into your plan so you dont have to come up with the 2500 or 3000 cash upfront. I had to pay a retainer fee of $ 700 which include my filing fee & the first credit counceling course. The rest is being put into my plan...
My plan calls for 40% payback to the creditors . So in 5 yrs I will be debt free (well credit cards anyway )... Its a livable plan as long as my employment stays the same and everything else goes good. Like one of the previous posters stated. You cant predict the future and if something changes you have the option to convert to a 7...
Good Luck ....

[bigstick]

Yeah I think i'm leaning the chap 13 way. I need to figure out now if I should try it on my own or get an attorney. If I can roll the monies into the plan for the attorney like you've said that would make the decision much easier. I'll need to talk to the attorneys that i've consulted with to see if that is something they will do. I also need to find our more about what to do with my car.