7 vs 13

[ksgirl38]

I just came from my second consultation and the attorney seems to think that a 13 would be a better option for me. Of course he's basing this on the fact that I indicated that I want to buy a house and at one point he mentioned that he and his wife have a real estate investment company so he may have been prejudiced.

The thing about a 7 I liked was that it was quick. My case is pretty simple, no house, just credit card debt and I have student loan and car payments left.

The thing about a 13 is that I would be able to buy a house sooner. The downside is it's going to cost me more and I wouldn't have as much to put down because I wouldn't be able to save as much. With the 7 I'd have to wait out that 2 year period.

I'm having difficulty in seeing why I would want to wait 3-5 more years to resolve my debt when I've already been dealing with it for 6 years already. On the other side, it might benefit me with a better credit score and help me buy a house later on. Any thoughts from those more experienced?

[dfoens]

Chapter 7

I understand I went had the same question. I selected the 7. My scores before BK we around 457 now I am 640s I filed in Oct of last year and was discharged in February. I have written letters and worked my credit most of my accounts have been deleted. I have two new credit cards and I am almost ready to get a new car. I hope to have my BK removed from my credit report within the year. My boyfriend has started a credit repair business he is helping so many people. I had so many violations that I have 12 law suits against 12 different creditors totaling 12,000 (1,000 each offense). I am not trying to sell you on using him I am merely saying that you can fix your credit and get your house sooner than you think.

DAWN

[LadyInTheRed]

I wouldn't count on buying a house 2 years into a Chap 13. Even if you could, I don't think you should base your decision on whether to file a 7 or a 13 on how soon you will be able to buy a house. If you qualify for a 7, file a 7 and be done with it. Somebody who qualifies for a 7 is going to have a hard time in a 13.

[LadyInTheRed]

I hope to have my BK removed from my credit report within the year.

Don't count on it. You have no basis to remove a correct public record from your credit report.

My boyfriend has started a credit repair business he is helping so many people. I had so many violations that I have 12 law suits against 12 different creditors totaling 12,000 (1,000 each offense). I am not trying to sell you on using him I am merely saying that you can fix your credit and get your house sooner than you think.

There are no short cuts to improving your credit rating or removing a BK from your credit report. It is going to be in the public records section for at least 7 years, maybe 10. You can get incorrect information removed and may even get lucky enough to have some correct entries removed because creditors don't bother responding to your dispute. Other than that, the only things that will improve your credit rating is time and responsible use of credit.

Credit repair companies can't do anything that is legal that you couldn't do on your own. Anybody who is considering hiring a credit repair company should read what the FTC has to say about them: http://www.ftc.gov/bcp/edu/pubs/cons...dit/cre13.shtm The site gives good information on how you can clean up your credit report on your own.

[dfoens]

Lady in Red

Thank you for your posts. However, while you are living in your chapter 13 world I will be living in freedom with a fresh start. For the record yes there are legal ways to have your credit repaired. I am living proof of that.

[LadyInTheRed]

Thank you for your posts. However, while you are living in your chapter 13 world I will be living in freedom with a fresh start. For the record yes there are legal ways to have your credit repaired. I am living proof of that.

I didn't say you can't have your credit repaired. I said you shouldn't expect to have accurate information removed from your report and that a credit repair company can't do anything for you that is legal and that you can't do for yourself.

I am as free as you are, thank you.

[despritfreya]

I indicated that I want to buy a house and at one point he mentioned that he and his wife have a real estate investment company so he may have been prejudiced.

What do you mean “prejudiced”? Is this attorney indicating that he might “help” you in your quest to purchase a home? I sure hope not. If he is, such is HIGHLY UNETHICAL and you should run away from him.

The thing about a 13 is that I would be able to buy a house sooner.

Sorry, but even if this is true, this is NO REASON to put yourself in a 3 to 5 year fish bowl.

The point of fact is you do not do a 13 unless you need to. “Need to”, means save a home, protect some non-exempt asset, pay taxes, don’t qualify for 7 or some other legitimate thing that a 13 can do for you that a 7 cannot. Your future credit score or large purchase is not one of those legitimate reasons. Do the 7 if you qualify and move on - you will be so much better off.

Des.

[TheBajan]

Definitely file the 7. You wont be able to buy a house 2 years into a 13 anyway and if you qualify for a 7, you prob won't be able to handle both payments in a 13 and the expenses that go along with buying a new house. Best of luck. Keep us informed!

[ksgirl38]

What do you mean “prejudiced”? Is this attorney indicating that he might “help” you in your quest to purchase a home? I sure hope not. If he is, such is HIGHLY UNETHICAL and you should run away from him.



Sorry, but even if this is true, this is NO REASON to put yourself in a 3 to 5 year fish bowl.

The point of fact is you do not do a 13 unless you need to. “Need to”, means save a home, protect some non-exempt asset, pay taxes, don’t qualify for 7 or some other legitimate thing that a 13 can do for you that a 7 cannot. Your future credit score or large purchase is not one of those legitimate reasons. Do the 7 if you qualify and move on - you will be so much better off.

Des.

I meant that as someone with a real estate company, or whatever it is, I think his opinion might be skewed. With the 13 I'm not sure I'd be able to save enough up for the downpayment.

I'm borderline. I came home and added up my paystubs from the last 6 months and I think I qualify for the 7, but I can't file until I get some other things taken care of. I forgot that my raise hit in February so by the time I'm ready to file it's going to be close since I'll be including more of the paystubs at my new rate. I have some savings I need to transfer into my Roth and some stocks that I need to sell and a CD at the bank that I need to cash out. Plus my car insurance is coming up for renewal and I currently get a good credit discount so I'm waiting for that.

I am thinking of going with the 7. I just can't force myself to deal with this any longer than I have to. I want to live like a normal person. As much as a 13 might look better on my credit report I'm pretty confident that I can bounce back quickly.

[ksgirl38]

Definitely file the 7. You wont be able to buy a house 2 years into a 13 anyway and if you qualify for a 7, you prob won't be able to handle both payments in a 13 and the expenses that go along with buying a new house. Best of luck. Keep us informed!

Thanks. That's kind of what I was thinking too, but it helps to get the advice of others as well.

[ValleYum]

I have some savings I need to transfer into my Roth and some stocks that I need to sell and a CD at the bank that I need to cash out.

Did you specifically ask your attorney about the above? Particularly the transfer of savings to your IRA? Not being a bee-yotch - just a question since it is a transfer of an unexempt asset (cash) to an exempt asset (IRA).

Yikes, I can't find anything in Kansas' BK exemptions that will cover any of this cash you gain from the sale of stock and the cashing of the CD unless you spend it on exempt items (and I don't see many of those) prior to filing.

It appears vehicles are exempt to 20k - do you own your vehicle outright? Maybe you could put the stock $ and CD $ into a newer vehicle under 20k (as long as you wait until the title is perfected before you file) and I presume you will pay your attorney with some of this money which will be okay to do. Again, all questions to make sure you have asked and gotten answers to before you file.

I don't see any exemptions for cash or savings in the bank - make sure to time you filing at a time when your account balances will be at their lowest. That sounds like a simplistic reminder but you would not believe the number of folks who have a check that doesn't clear until after they file and Boom! the trustee wants that money for their BK estate.

Kansas' BK exemptions can be found here:

http://www.legalconsumer.com/bankruptcy/bankruptcy-law.php?ST=KS

I am thinking of going with the 7. I just can't force myself to deal with this any longer than I have to. I want to live like a normal person. As much as a 13 might look better on my credit report I'm pretty confident that I can bounce back quickly.

Go for the Chapter 7 and be done!!

Either type of BK costs your credit score the same number of points*. The Chapter 13 falls off 7 years after filing while it takes 10 years from filing for a Chapter 7 to come off the credit report.

So, if you are in a 5 year Chapter 13, your BK will come off your credit report 2 years after you are discharged so it seems a lot shorter.

Since a Chapter 7 takes only a few months to be discharged, you basically have to deal with the BK on your report for the full 10 years.


*

The FICO scoring formula treats both Chapter 7 and Chapter 13 Bankruptcies similarly in terms of how they affect one's FICO score. That is, the formula considers these two forms of bankruptcy as having the same level of severity and, for both types, uses the filing date to determine how long ago the bankruptcy took place. As with other negative credit information, the negative effect of a bankruptcy to one's FICO score will diminish over time.

Both types of bankruptcy are considered in this similar manner because our research has found both types to be similarly predictive in assessing future creditworthiness.

http://myfico.custhelp.com/app/answers/detail/a_id/179/~/chapter-7-and-13-bankruptcies

I am saying all of this to you just to give you my thoughts - you have to do what is best for you.

[ksgirl38]

Did you specifically ask your attorney about the above? Particularly the transfer of savings to your IRA? Not being a bee-yotch - just a question since it is a transfer of an unexempt asset (cash) to an exempt asset (IRA).

Yikes, I can't find anything in Kansas' BK exemptions that will cover any of this cash you gain from the sale of stock and the cashing of the CD unless you spend it on exempt items (and I don't see many of those) prior to filing.

It appears vehicles are exempt to 20k - do you own your vehicle outright? Maybe you could put the stock $ and CD $ into a newer vehicle under 20k (as long as you wait until the title is perfected before you file) and I presume you will pay your attorney with some of this money which will be okay to do. Again, all questions to make sure you have asked and gotten answers to before you file.

I don't see any exemptions for cash or savings in the bank - make sure to time you filing at a time when your account balances will be at their lowest. That sounds like a simplistic reminder but you would not believe the number of folks who have a check that doesn't clear until after they file and Boom! the trustee wants that money for their BK estate.

Kansas' BK exemptions can be found here:

http://www.legalconsumer.com/bankruptcy/bankruptcy-law.php?ST=KS

Go for the Chapter 7 and be done!!

Either type of BK costs your credit score the same number of points*. The Chapter 13 falls off 7 years after filing while it takes 10 years from filing for a Chapter 7 to come off the credit report.

So, if you are in a 5 year Chapter 13, your BK will come off your credit report 2 years after you are discharged so it seems a lot shorter.

Since a Chapter 7 takes only a few months to be discharged, you basically have to deal with the BK on your report for the full 10 years.


*

http://myfico.custhelp.com/app/answers/detail/a_id/179/~/chapter-7-and-13-bankruptcies

I am saying all of this to you just to give you my thoughts - you have to do what is best for you.

When we were discussing assets he said to transfer savings to my Roth. It was his idea. I should clarify on the stocks, it's under $500 and I'll probably roll that into the IRA too unless I use it towards attorney fees. The CD will go into the Roth as well.

Correct, vehicles are exempt in Kansas so I'm okay there. I'm only 2 years in on the loan, but I'm not at all concerned about that. We discussed that today and I forget what he called it, but it's not a reaffirmation (is that the right word, I'm so tired LOL). He actually suggested I pay an entire year of my car insurance to guarantee that I keep the lower rate with the good credit discount so I may use the CD for that. The CD is only $1300 anyway and I'll have penalties for cashing out early. I'll bring all this up at the next consultation and see what a different attorney says about it.

So the trustee doesn't take into account checks written, but not necessarily cashed. Thanks for that info. Not that I write a lot of checks, most of my stuff is paid online, but my apartment complex is always slow to cash their check. Not that I've minded in the past.

I'm actually not as concerned about my credit score as I was. Maybe I will when I see what it falls to. Unfortunately he mentioned that people with higher credit scores seem to have theirs fall further than someone with a lower credit score, but we discussed ways to bump it up so I'm already thinking about that. Well, see how it affects me. I managed to get it to 764, or 782 depending on which credit report you go by, and that was with $30,000 of credit card debt so I can't be doing all that bad. Maybe this is part of my urgency in not wanting to be without a credit card. I'm already wanting to start the rebuilding process.

[Tater]

I'm a little confused here but that doesn't take make much for me. I know when we talked to an attorney about Chapter 13, the strongly recommended not to take on any new debt, unless absolutely necessary because it would have to be approved by the trustee. She mentioned something about making sure we had vehicles that could last through the five year payment plan. How could you buy a house during a Chapter 13? Would you already be at 100% payback to the unsecured creditors? If not, couldn't the trustee look at it, if she can afford to buy a new house, she can afford to pay more to her creditors? Couldn't that lead to a higher monthly payment then? That is just my thought process from what I've been told.

We were thrilled to learn we qualified for a Chapter 7 but we are already homeowners. If you qualify for a Chapter 7, then I would say go for it. You will be done with the BK process sooner. If you have to wait two years to buy a house after discharge, then this will give you time to save up for a down payment, as well as a chance to rebuild your credit. We have lived without credit cards for over a year. Yes, I viewed them as a crutch too but you learn to live without them. You may want to take some time after your discharge to get your credit report cleaned up a little and make sure everything states IIB. Also, this will give you time to build up a savings account.

It seems most of your debt stems from credit card use and I don't know the personal circumstances behind that use. Please be careful when trying to get credit cards right after bankruptcy. You don't want to end up in the same financial mess a few years down the road. As other suggested, talk to another attorney about the stocks and cd before doing anything. They might have other suggestions. You can take the means test online for free. We used the legal consumer website and you just punch in your zip code and go from there. Make sure to take the time to read everything, the first time I did it, I really messed it up... LOL!

[Drazil65]

As we are here to assist you and hopefully guide and answer questions as well as support, I have to ask, have you thought deeply about what got you here and what you need to change for your future? I am asking because (and forgive me if I am wrong) this just appears to be a quick fix for all this debt (all CC from what I gather) you don't want to deal with any longer. You are more concerned when you can buy a house, which if you have never owned one you are in for a big surprise on the financial side. When you file if you do not fix the issue that got you there (alot of credit card debt and spending habits) then you are in big trouble in the future. This appears to be a big bother to you and not a lesson to learn from at all. Have you read many of the stories here, there is alot of heartache that goes with this decision and I just don't get the feeling that it even matters to except that you cannot buy a house for 2 years (which is probably not going to happen anyway).

I do not mean to be unsupportive in any way but I am not sure you realize the impact of this decision. You seem to have a decent job so why not start the preplanning to the budget you will need to be on once you file to change the course of your financial world. This is not a quick fix nor to be taken lightly, its real life with real life consequences. The debt can go away but your attitude towards spending and CC need an adjustment, please take the time to realize your mistakes and adjust your thinking. The best of luck to you.

[ksgirl38]

I'm a little confused here but that doesn't take make much for me. I know when we talked to an attorney about Chapter 13, the strongly recommended not to take on any new debt, unless absolutely necessary because it would have to be approved by the trustee. She mentioned something about making sure we had vehicles that could last through the five year payment plan. How could you buy a house during a Chapter 13? Would you already be at 100% payback to the unsecured creditors? If not, couldn't the trustee look at it, if she can afford to buy a new house, she can afford to pay more to her creditors? Couldn't that lead to a higher monthly payment then? That is just my thought process from what I've been told.

We were thrilled to learn we qualified for a Chapter 7 but we are already homeowners. If you qualify for a Chapter 7, then I would say go for it. You will be done with the BK process sooner. If you have to wait two years to buy a house after discharge, then this will give you time to save up for a down payment, as well as a chance to rebuild your credit. We have lived without credit cards for over a year. Yes, I viewed them as a crutch too but you learn to live without them. You may want to take some time after your discharge to get your credit report cleaned up a little and make sure everything states IIB. Also, this will give you time to build up a savings account.

It seems most of your debt stems from credit card use and I don't know the personal circumstances behind that use. Please be careful when trying to get credit cards right after bankruptcy. You don't want to end up in the same financial mess a few years down the road. As other suggested, talk to another attorney about the stocks and cd before doing anything. They might have other suggestions. You can take the means test online for free. We used the legal consumer website and you just punch in your zip code and go from there. Make sure to take the time to read everything, the first time I did it, I really messed it up... LOL!

That is a good point. To be honest, I didn't really understand Chapter 13 until I talked to this attorney. Wouldn't it be the same as a new credit card you took out after filing? Any new debt on that you'd be responsible for. (Although I would have hope no one would take anything additional on.) Are the payment amounts locked in so to speak on a Ch 13? I'm not sure I fully understand either.

I'm not concerned about not having a credit card to use. It's more that I want one to start rebuilding that credit as soon as possible. I've always had good credit so I guess the thought of my credit score dropping below 700 is what bothers me the most, but I know that's something easily fixed. The attorney that I talked to yesterday layed out a great plan that made total sense. I've never had a problem using credit cards until I had a couple of bouts with unemployment that sadly put me behind and forced me to use them more than I cared for. I think after that I just got into the habit of using them instead of cash since I don't like to carry a lot of cash on me. I was still paying off what I charged every month and paying additional to cover the debt, but just could never get ahead. Although I have made every payment on time. Unfortunately I'm just not seeing the debt go down any.

I tried the means test online last night. I came out a couple thousand under so depending on how long I wait to file I should just make it. I had a raise that went into effect in February so if I can include more of the older paystubs and more of the ones without overtime then I should be good. I'm not too concerned about that.

I think I will go with the Ch 7. It does seem like the better option. I appreciate all the feedback. Sometimes it helps to have a second opinion. Thanks.