To file or not to file?

[jody611]

Hi,
I am very confused about what my husband and I should do. We are in 48K unsecured credit card debt. We currently rent and have no assets. I am still making payments on one financed car, only has about 4k remaining on the loan. My husband recently lost his job and we just couldn't keep up the hefty cc payments. I have stopped paying the large ones, cuz we dont have the $ and continue to make payments on the smaller ones. I dont want to seem like I am giving prefential treament to one card over another, I am just paying what we can afford. We have also contacted a lawyer to file BK. However we need to wait another 2 months to file to be under the income mark for ch 7. In that time, my lawyer has suggested we stop paying all bills. I already had one cc call my work and I am school teacher, so I am a nervous wreck to stop payments on all other cards. I have made sure that my work number isnt on any other accounts, but I am sure they will be able to locate it. My lawyer just said it won't be long till you file, so you'll have to deal with it.. My question is this.. should we file bankruptcy or should I try to negotiate down the debt. The problem with negotiating down the debt is we dont have large sums of $ to bargain with... I know filing bankruptcy will ruin our credit for 7yrs. We are going to need to buy another car pretty soon...and someday we would like to buy a house.I have read about the possibility of FHA loan, but it is all very scary. I have always paid all my cc bills, and to stop paying and not look back isn't as easy as one would think. I really need some guidance and advice...Has anyone paid cc minimums until bankruptcy?

[free2breathe]

While there are people who continue to pay minimum payments, the general consensus is "why throw good money after bad." If you are planning to file anyway, you would be better off hanging on to that money to pay for your attorney. I know that it's very scary, and the calls from creditors create that black cloud of dread. Once you reach the safe mark for the 6 month look back for income, you'll be breathing a lot easier. Then you'll be able to let your attorney deal with the creditors.

In the mean time, The Fair Debt Collection Practices Act requires that debt collectors stop calling you at home and at work once you ask them to stop. The law specifies that your request must be in writing, therefore, you should tell them to stop calling you at home and at work the next time they call, but then follow it up with a certified letter, return receipt requested.

And one of the best bits of advice I've read on these forums...."Bankruptcy is a business decision." Try to let go of the emotions of it and just look at it as what you have to do to get control of your finances again.

[LadyInTheRed]

Welcome to the board, Jody.

My question is this.. should we file bankruptcy or should I try to negotiate down the debt. The problem with negotiating down the debt is we dont have large sums of $ to bargain with... I know filing bankruptcy will ruin our credit for 7yrs.

You are correct that you will likely be unsuccessful negotiating your debt if you don't have enough cash to make a significant payment. Also, if you have several creditors, getting all of them to negotiate will be difficult. You may settle with one, but there will be no guarantee that you will be able to settle with the next. So, you could wind up having to file BK anyway. Even if you had the cash, you would have to pay income tax on the amount forgiven. The settlement will also destroy your credit rating. Some say it is almost as bad as BK. I don't know if that's true or not, but I do know it will be on your credit report as long as the bankruptcy will.

We are going to need to buy another car pretty soon...and someday we would like to buy a house.

You will pay a high interest rate after BK, but you will be able to get a car loan which will help you rebuild your credit while you save to buy a house. Nobody can tell you whether you should file BK based on the info you have provided. But know that BK is not the end of your financial life. It's a fresh start. If you learn to live within your means and start saving, you will be able to qualify for a home loan, as early as 2 years after discharge. But, you may need longer then that to get the best rates and save for a down payment.

As for the creditor calls, the letters are a good idea. You can probably get help with what to say in a letter by reading the "collections" forum on this board. In addition to that, I suggest the following:

At work: No creditor called me at work more than once. I told them they were calling me at work and it was disruptive and prohibited by my employer. They confirmed my home phone number and told me they would not call me at work again. And they didn't. I don't know if all creditors are that cooperative.

To family: My understanding is that the original creditors are not as likely to call family members if they know how to contact you. Answer each creditor's call once so they know they have the correct contact information. This will reduce the chances they will call your family. Tell them you are having financial difficulties, you can't pay right now, are not sure when you will be able to, but will know more in 30 days.

To home: Once you answer each creditor's call once, stop answering. Use caller ID. I didn't even have caller ID until I decided to stop paying my credit cards in anticipation of filing BK. I'm so glad I added it to my phone.

It felt weird to stop paying my credit card bills after always paying on time. But, once I decided to file, I knew that paying the credit card bills would be just like throwing my money in the waste basket.

[jody611]

Thank you both for your input! I appreciate the feedback . I know that our only decision is bankruptcy, and once this goes through we can start anew. But between and discharge, I am going to do my best to mimimize the stress. This forum has a wealth of information that has been very helpful thus far in helping us to make this decision. I will check out the collections thread next. I will keep you posted. thx