Alternatives better if only unsecured debt?

[Grumpy2]

I have been milling over filing ch7 for years. Various things have happened that have allowed me to put it off. Now we had to move again because our landlord decided to sell the house. We got the cheapest rent we could find, but it is still 400 more than we can afford. So this is pretty much the nail in the coffin. Starting last month, I defaulted on all unsecured debts except student loans. We have about $17,000 in credit card debt and $4,000 in an unsecured signature loan. My wife hasn't been able to find a job. If we don't pay the unsecured debts, we are just fine. I have learned that some banks are more classy than others in default already...with capital one being hands down the most annoying. So here I am wondering if it would be better to just let the defaults run their course and see if a settlement pops up that we can take advantage of. We don't have any cash or assets. I tried to consolidate all of it a year ago, but we had a very unfair and inaccurate mark on our credit report that prevented us from doing so. Our credit union reported partial payment agreement when we were on time and had no such thing...it took 9 months, contacting the CFO and preliminary actions to sue to get it off of our report. By that time the damage was really done. Anyway, here I am scratching my head about whether it is worth it for 21-22k in debt. I think that all except american express (6k) will consider some kind of settlement. Assuming my wife can find a job and produce maybe 20% of the total, is it better to go the settlement route? I'd just hate to use up my CH7 filing for the decade on something like that when you never know what kind of medical bills could pop up in the future. CH13 isn't really an option because I think the unsecured creditors would have objections and the payments would be a little too tight.

opinions?

Thanks.

[TXskyblue]

Your state appears to have a 4 year statute of limitations for credit card debt.

Your debt doesn't seem very high to me. You could try waiting out the SOL and seeing if they sue you. If they don't sue you, great. If they do sue you, you could then file chap 7 at that point.

[LadyInTheRed]

$22K in debt is a lot of debt if your income is not high enough to pay it down and pay your living expenses without incurring additional debt. Assuming you can't do that, whether to file BK depends on whether you can stomach uncertainty and the possibility of delaying the inevitable.

You can try to settle your debts and/or hope the creditors do not sue before the SOL runs and only file BK if you get sued. But, that could draw things out almost 4 years if creditors decide to sue you right before the SOL runs. Also, junk debt buyers are not above trying to collect old debts. The expiration of an SOL is not a guarantee of peace. Do you understand the income tax consequences of settling your debt?

If you are certain you can live within your means on your current income, you can file BK now and put the debt behind you for certain.

CH13 isn't really an option because I think the unsecured creditors would have objections and the payments would be a little too tight.

Why you think the unsecured creditors would object to a 13, but not a 7? In a 13, they are more likely to get paid something. If you can qualify for a Chap 7, I don't know why you would think of Chap 13 as a preferable option anyway.

[Grumpy2]

I don't think ch13 is preferable. I was thinking they would object because the available payment amount is only enough to cover vehicle loans. Using safe harbor dollar amounts for my family size, there is technically not enough disposable income for a payment plan at all. They would get nothing in either scenario. I'm not entirely certain about the future when it comes to being able to stay within our means. In the past 8 years, I have managed to increase my income 50%...and probably 20% of that is locality increase because we had to move to a more expensive market. That is career start to present. I am pretty much maxxed out on the pay scale. In the same time period, my rent has increased 270%. That isn't counting all of the other cost increases that come along with a surprise kid. My wife hasn't finished her college degree and the school told her she had to start over because she was away for 5 years...which makes her 11k in student loans a big waste. Pretty crappy outcome. People here have worse stories though. Relatively speaking, I have it pretty good.

[keepsmiling]

First, I get settlement offers from Amex pretty regularly
Second, if you give us a jot more info vis a vis your salary and number in family, we can advise you better.

[LadyInTheRed]

I'm not entirely certain about the future when it comes to being able to stay within our means.

I suggest you not weigh your decision too much on what may or may not happen in the future. Delaying BK because you might have medical problems or might have a decrease in income or increases in living expenses in the future makes no sense. Nobody would ever file BK if they based their decisions on things that might or might not happen in the future. You prepare for the future by having medical insurance, working to build an emergency savings and not ever accumulating debt again. Based on your current income and expenses, can you live within your means if you didn't have to pay your dischargeable unsecured debt? That is what is important.

[Grumpy2]

Well, we are a family of 5. My income is fixed at around 79-80k and the median income for the state is 84k. I defaulted on a couple credit cards for the first time in November. We have no savings whatsoever and we owe about what our cars are worth. We have one of the cheapest rents around at $1,850 a month. If I were to pay unsecured debts, we would be short $400 a month. If I were to continue to not pay them, we would have $200 to save every month as well as be able to save my entire 3rd paycheck I get twice a year. (26 pay periods per year, so two months have 3). My math was showing 4k in savings by July. I don't have the cash to pay an attorney and the $400 in court fees is a stretch at the moment, but should be ok by the time February comes around and I get my tax return.

I'm also staring down the barrel of a potential government shutdown over a federal budget battle because of a do-nothing senate with an agenda against Obama's new immigration order. The last shutdown was what got me in this mess in the first place. (My agency had furloughs long before the shutdown).

[bcohen]

I suggest you not weigh your decision too much on what may or may not happen in the future. Delaying BK because you might have medical problems or might have a decrease in income or increases in living expenses in the future makes no sense. Nobody would ever file BK if they based their decisions on things that might or might not happen in the future. You prepare for the future by having medical insurance, working to build an emergency savings and not ever accumulating debt again. Based on your current income and expenses, can you live within your means if you didn't have to pay your dischargeable unsecured debt? That is what is important.

I respectfully disagree. If you have good reason to believe that you might suffer a decrease in income, or increase in living expenses, then it would be prudent to wait. Likewise, if you know that you have a chronic condition and might incur medical expenses, it would be prudent to NOT file for bankruptcy until it becomes absolutely necessary. It is usually better to wait until you are successfully sued, and then file.

[BKAttyMI]

If you qualify for a Chapter 7 now with your wife out of work, now might be just the time to put this mess behind you and start over. Once she gets a job, Chapter 7 may no longer be an option.

Also, don't rule out a Chapter 13 because of something you've read on the internet. Chapter 13s can lower the interest rate on your vehicles amongst a whole bunch of benefits. Go sit down with a couple of bankruptcy attorneys in your area for free consults, it is worth your time.

[LadyInTheRed]

I respectfully disagree. If you have good reason to believe that you might suffer a decrease in income, or increase in living expenses, then it would be prudent to wait. Likewise, if you know that you have a chronic condition and might incur medical expenses, it would be prudent to NOT file for bankruptcy until it becomes absolutely necessary. It is usually better to wait until you are successfully sued, and then file.

I guess I should have been more clear. I am talking about when you have no reason based on current circumstances to think those things will happen. The OP has mentioned no current medical problems, only that "you never know what kind of medical bills could pop up in the future." That is not a good reason to put off filing BK. We now know he is worried about the possibility of a government shut down that would reduce his income, so it might make sense to wait to see what happens on that front. Even without that, it may make sense to wait to see if he is successfully sued. But there is uncertainty and other drawbacks in that strategy. It's not the right strategy for everyone.

[Grumpy2]

I do have current medical issues. None that keep me from doing my desk job, I just can't work something like construction. I also had a car accident a year ago where I rear-ended someone. The claim is still open and they say that they are still receiving medical treatment. Based on conversations on the scene, repairs, etc...I think they are milking it for everything they can. I actually don't have a problem with that as long as they are reasonable. I have one year left on California SOL for them to sue me for some kind of negligence to try to get over my coverage (100/300). I was told I could just name the plaintiff and insurance co as contingent creditors in my CH7.
I think will go ahead and file when one sues me.

Curious, would I get in trouble for paying one cc with a min payment of 30 bucks? 30 bucks a month is better than the collection calls. ha.