Long term impact of chap 7 (tough choices)

[pfdaly]

I'm trying to decide whether to do chap 7, or negotiate payoff settlement and payoff credit cards.

My situation..
Unemployed approx 1 yr after 20 years solid employment in PC industry.
House is in foreclosure (1 year behind, California non-recourse loan) and we plan to walk away after lender holds auction next month.
$45k in unsecured CC debt
Own 2 older cars outright, combined value less than $10k.
no significant assets.

BK attorney strongly suggested chap 7 path, but my instinct is to try to payoff the CC debt after getting them to negotiate them down to say $25-$30k.

A family member said they would give me the money for the $25-30K payoff if it was important for my financial future / employment future.

I know either option will trash my credit short term. The question is how much is avoiding an official BK ruling worth to me? In the near future I need to be able to rent a place, in the distant future I'd like to buy again, and perhaps start a business.

So... is it significantly better to have a patch of bad credit hist and NO BK vs a patch of bad credit hist and a BK on your record?

Thanks,
Pat

ps. I realize this is somewhat subjective and an emotional decision as well.

[DEBTCHAINS]

I really can't speak to your industry and the importance of your credit rating when it comes to a job. In my experience, it's who you know. So first ad foremost, I hope you get a job soon, good luck.
As for your situation, I'd file. 25k or so to a relative? I'd rather not be in that spot. Paying it off won't be fun, and neither will the uncomfortable situation. Your credit will be trashed regardless, so why not wipe the slate clean?
My opinion anyway. Good luck with your decision.

[DEBTCHAINS]

By the way, search the forums on here. Plenty of people are renting after BK, and you can buy again someday as well. BK isn't the end of the world.

[NoTomatoCan]

Not sure what part of the PC industry you are/were in, but I direct a team of about 50 managers, engineers, analysts, and technicians and have 3 employees (that I know of) who filed BK. I would hire any of them again without even thinking about it.

IMHO - Unless you need secret/top secret clearance or work in a financial services industry, filing BK vs. some CC charge offs shouldn't make that big of a difference on how a potential employer views you.

What would I do? Probably file CH7, rent for a while, and then after a few years when I was employed again and my credit had rebounded, approach that same relative to see if they would still be willing to give me the $25k-$30k for a down payment on another house...

[Logan]

I filed Ch 7 a little over 3 years ago and I barely even know it. Most lenders want at least 3 years out of BK but there are enough lenders to get you to that point.

As far as buying a house you'll have to wait 3 years due to your foreclosure and only 2 years for an fha loan due to ch. 7.

I can only say as far as employment goes that you seem to have a valid reason to go BK so an explanation may be good enough.

Logan

[onwards]

File. Rent before you file, so you don't have to deal with that.

I got discharged in December of 2009.

In June 2010 I received an unsecured, $5000 credit card with a %15 APR. That's - count em - six months. My credit scores today are 680 (FAKO) across the board.

NO ONE cares. There is NO stigma, especially not these days. Heck, I've been so upfront about it that I might as well walk around and hand people business cards stating "I filed for Ch7". The most I ever hear is "ohh, sorry to hear that... so tell me, what was it like?"

Thank your relative and ask them if they would be willing to help you post-filing with a smaller amount. But don't throw good money after bad.

[keepmine]

I'd not take a relative's money to settle unsecured debt.
I'd suggest doing nothing until you have some sort of job and some income rolling in. After all, you still need to support yourself post bk. After you have a basic safety net in place, file bk and if necessary, use the money from the relative to help you post bk.
Don't waste someone's money for the sake of a credit rating.

[Pandora]

agree with the others - file - dont be obligated to your family member; sometimes thats worse than owing debt collectors. Nothing breaks apart families faster than monies owed.

Also - even if you settle the debt - if there is even a remote possibility of being 1099'd on the difference and having it count as income...think about that scenario.

Get a clean slate - wipe out the debt and start over.

[pfdaly]

Thanks all, for the input.