Making the decision to file personal bankruptcy (prepare for long post)

[iNTeNSeBLue98]

I normally don't bring up personal matters such as this when I'm lurking and/or posting on the DIS, but I'm going to go out of my mind if I don't bend an ear of someone who might understand my situation.

DH and I have been struggling, with our finances. This is not a new problem, but I finally felt like I was making progress. I'd been doing all I could with our meager income, but there were some bills that had to suffered and payments would be made bimonthly if I couldn't pay the regular minimum amount due.

Then DH lost his job, right at Thanksgiving. He was out of work for 4 weeks until he was hired through a temp. service. He's got a job at a top-notch manufacturing company and once they would decide to hire him full-time on their payroll we will see a substantial rate increase. In the meantime our creditors (most in my name) are calling daily.

Much of the problem is dept. store charges and a gasoline co. card. One of the biggest debts is for the former Speigel credit card. Since they (FCNB) sold off the debt when they reorganzied, I have been slammed with late fees, which led to over-the-limit fees when I failed to get my payments to them on time. I would usually get my check off to them within the week following the due date in order to pay higher priority debts at the beginning of the month (rent). I can not get a handle on this one. There are few others, while not with near the balance, are a problem for me to pay on time and I'm socked with late fees constantly from every one of them. There's also the matter of my dental bill- for $900+ worth of work lst summer (having my teeth re-filled to prevent further cracking and breaking), I am left with a balance over $200 that my dental insurance did not cover.

I'm at a point where most of these bills are now pushing 60 days, or are just over, late. We're getting back on the wagon again now that the holidays are over (no holiday pay with the new job). We lost a good month & a half's income and I scrimped to pay important things like the rent, the car payment and car insurance and anything else of significance.

I am contemplating my options:
1) Get back to paying regularly again, on time. Easier said than done. I don't know where to I can cut back any further. Now that DH is on 3rd shift, I could probably take on extra hours in another dept. at work, and he's considering a morning job for extra money. I'll probably be forced to take a portion of our income tax refund to lighten the burden. It'll hurt because I meant for it to go towards WDW in November this year. That trip may need to be postponed yet again, but only until Feb. next year if we can get things straightened out with the bills.
2) Seek advice of a Consumer Credit Counciling Agency. I understand (I think from Suze Orman) that this is a strike on the credit report, but how much worse can it be that being 2-3 minths late with my payments?
3) File for bankruptcy. Again, not something you'd want on the credit report, but I'm beginning to think I don't have much of a choice. Can I be selective in what is included in the filing? My car loan was extended 15 months after it was re-po'ed (a whole other fiasco DH helped create) and I really want to pay it off and I have a personal loan that I'd like to pay off on my own as well.

If it matters- no student loans are involved, we do not have a major credit card and we do not own a home. I had hoped that by next year we might be able to buy our first house, but after the past 6-12 months I don't see that happening.

So goes the circle of our life.
Thanks, in advance, for taking the time to read and respond.

 

[barbeml]

I am so sorry for what you are going through.

From what I hear, it is best to avoid bankruptcy at all costs. If you can go the credit counseling/debt consolidation route, I think you will be better off in the long term, personally and financially. You will feel better about yourselves if you honor your debts than if you file, even if it takes time to dig out.

Good luck--I will keep a good thought for you.

 

[Disney Doll]

Did you try calling all your creditors and telling them of your recent job situations and seeing if they would be willing to let you work out a payment plan, where you would pay a lesser amount, maybe even less than the monthly minimum, but they would accept it as payment toward your balance? Then perhaps when the financial burden eased a bit, you could pay off one or two of them in a lump sum payment? From what I understand, many companies are willing to do this, if you speak to the right person. Just make sure you write down names, dates, titles, and notes about the conversations you have.

My only other suggestion is personal bankruptcy, but that makes it so difficult to ever buy a home etc. I know they say it only "counts" for 7 years, but it is always pon your record and I think it affects people's credit ratings for years to come.

If you are getting an income tax refund, I suggest it all go toward paying your bills and wait on WDW till this financial situation eases up.

 

[SOBDOSNV]

We know where you are coming from. We filed BK withing the last 2 yrs, and I had a steady job. Just too much spending and not watching it. I've heard that most people that use credit counseling end up filing BK anyway. We did look at them, but they weren't much help. As far as being selective in what goes, no you don't select. You have to disclose all debts, and they wipe out everything except what's exempt. My advice is to get a good lawyer. Yes you have to pay some money, but get a good one it's worth it. Ask around if you have anybody you can talk to about this. The best referal is from somebody that's been there. See if there is a service that helps find a lawyer. My work has a counseling agency that helped us.
Most of all, don't be embarrased by this, it happened to millions of people. You're not the first, and you won't be the last. Yes your credit will be done, but the piece of mind is worth it. You can get credit after it's done, don't believe everything you hear. We went out and bought a truck 6 months after filing and a year later we have "1" credit card that I use for work. I don't know your finacial situation or how much your debt is, but a lawyer can help you decide if this is the best road to go down. We do not regret doing it, and in fact think it may have saved our marriage. As soon as you see a lawyer and start filing of BK, the creditors have to stop calling you, and they will. I hope this helped, don't worry things will get better.

 

[chager]

If there is any way to avaid a BK do so. It will be next to impossible to get a mortgage unless you are discharged at least 2 years and even then it will be a high interest rate. It is much easier to explain a few months of late payments due to a job loss. If you have to postpone a vacation then do so. Use you tax returns and any extra money you get to pay off the credit cards. Talk with the credit companies to work out payments. Usually medical bills can have small monthlly payments. (Say $10 maybe) If it comes down to it talk with a credit counsellor just try your best to avoid BK. As far as your car it would be up to the bank as to if they will let you re-sign for it. You have to declare everything in a BK. You can't pick and choose. Good luck with whatever you choose.

 

[iNTeNSeBLue98]

FYI- the car was purchase new in 1998, when things were better and our payment was higher. The re-po was Aug-Sep02 and I've been making those payments, which were reduced on time since. We're only paying interest on the loan at this point, less than $3K owed on $21K for a $14K car.

 

[Toby'sFriend]

If there is a good chance that your income will be increasing in the near future, then bankruptcy probably isn't a good choice for you. Not only is it morally problematic -- it will cause problems for your financial life in the future, especially if you want to buy a house. There really isn't much to lose by at least talking to a debt counsellor. They can be very helpful in handling the phone calls and giving you positive tools to control your life.

The trick is to find a plan that you can live with, and then actually follow the plan. Like it was written, many people do end up in bankruptcy anyway.....because they do not do anything to change the behavior that ended them up in the mess. AND that very often does mean things like dropping WDW vacations for a couple of years. I'm sorry, but if you are 60 days behind on payments, then you just can't afford it right now. Hopefully in the future when your bills are paid and your financial future is looking rosy, annual WDW vacations (that won't drive you into financial ruin) will be a reality.

This is a link that might help you. The agencies associated with this agency are accredited and do meet certain standards. A phone call can never hurt and just might help.

http://www.debtadvice.org/AboutUs/aboutus_01.html

 

[chell]

It sounds to me that it might be too late for the credit counciling. Whatever happens I'm sending you the best of luck!

They will both be on your credit at least 7 years, so either way you go it will have a negative effect on your credit.

Which bankruptcy were you looking at? 7 or 13?

 

[Lisa F]

Bankrupcy should be a last resort, and while it might be tempting to "wipe the slate clean" so to speak, if you have any reasonable way of catching up on your payments I think you should exhaust those before declaring bankrupcy.

I would also avoid consumer credit counseling. I have read that those can look even WORSE on your credit report than bankrupcy because it basically means that not only can you not manage your own debt, but you are on the verge of bankrupcy and anyone who lends you $$ stands a VERY good chance of losing it if you should declare bankrupcy anyway (an astounding number of people who turn to consumer credit counseling agencies end up declaring bankrupcy anyway).

What you CAN do is do the legwork that the consumer credit counseling company would do for you yourself. You don't need to be part of a credit counseling company in order to negotiate with lenders.

The first thing I would do is try to get your payments on your store card switched to the 15th of the month, this way you can pay them ON TIME and not have it conflict with rent. You can also see if you can work out some kind of payment schedule with them. They would rather have their money than sell it to a debt collection service for pennies on the dollar, so they will be very likely to work with you on that one. You might even be able to work with them to lower interest rates somewhat, it doesn't hurt to ask and the worst they can do is say no.

Are you continuing to run up charges on these cards? If you are, you have to STOP. That's only adding to the problem. Go to a "cash only" system where you budget the amount of cash you need for EVERYTHING at the beginning of the week and that's all you get to spend. A friend of mine did this for a while to get some spending under control and while it was inconvenient, it really showed her where everything was going and she learned so much from it that she was able to go back to using her debit card and stuff but still keep things under control.

Try to work out something similar with your dentist, maybe $20/month until it is paid off? Again, if you make an effort I'm sure they would rather see steady money coming in, even if slow, than nothing at all.

I agree with a previous poster that you should not even think about going to WDW until your finances are under control. It's a luxury, plain and simple, and needs to come after your regular bills are met. It will be a very good feeling to get those paid off, and then you can resume the luxuries guilt free.

Hope some of that helps and good luck.

 

[iNTeNSeBLue98]

Thanks for your points of view. I wasnted to piped up and say that WDW is only an option IF the bills are current - always has been that way. We were just finally getting to a point where it was becoming a reality. I had started putting money into a Christmas Club, but it's not so much right now that it would be worth stopping it. I think once regular paychecks start flowing, which they have in the past few weeks, we can get through this. It really annoys me when the calls come at work . Thanks again for letting me vent. I may have to take some time over my lunch breaks to start calling these people and seeing which ones are willing to see things my way, so many are hard to reach by the time I get home from work.

 

[floridafam]

Call your creditors first. They would rather work with you than settle after it goes to collections.

Don't even think about going to WDW. You should close the Christmas Club and use that money for bills.

If you go to a credit counselor use Consumer Credit Counseling Services. They will help you pay your bills on time and will work with your creditors on payment schedules, etc.

You will make it through this if you put your mind to it.

Worry about a house later. A lot of lenders will give you a mortgage you really can't afford. Concentrate on paying the rent and getting bills paid. Owning a home isn't the most important thing on earth. Sometimes when I think about our property taxes, the roof we have to put on next summer or things that can pop up at any time, I wish we still rented.

Good luck.

 

[Lisa F]

Definately when you call them, get names and departments. This way if you get harassing phone calls, you can say "I spoke to so and so in your xxx department and this is the agreement we came to" rather than needing to make excuses. Hopefully once you call them and work something out, the harassing phone calls will stop and that will take some pressure off. Keep records of EVERYTHING you say and everything they say. Start a file, every time you are on the phone write down the date and time on a piece of paper and record everything that is said. You can do it, but you just need to be organized about it. It really sounds like you are close to solving this problem on your own. Good for you!

 

[ZachnElli]

My dh had to file bankruptcy 13 years ago. It stays on your record for 10 years, not 7. You CAN buy a house after the bankruptcy has been discharged for 2 years and you can find a mortgage company that will charge you the same interest rate as everyone else. I know, we did it at exactly 2 years after the bankruptcy was discharged. However, any other credit was EXTREMELY hard to get. Credit cards, car loans, etc. VERY hard to get for many years. I know not everyone can be as successful as we were after, but you can be if you learn from your mistakes. We saved all my paychecks for a down payment on a house and lived on dh's paycheck alone and lived in a horrible/cheap rental for 2 years. But it worked! Good luck with whatever you decide!

 

[ripleysmom]

Creditors are not allowed to call you at work. If they call you at work tell them to stop calling you there and if they do not then you will report them. By law they have to stop.

You also have rights as to how often they make those phone calls and when they make them. I don't know the exact details but you do have rights as far as collection phone calls go. Check into them and exercise them.

 

[Planogirl]

I agree that it would be wisest to call your creditors first. If all of your debts are still with the original creditors and haven't gone to collection agencies, you may be able to work out payment plans. You can also work with collection agencies but I would insist on paying the original company directly if possible. If that doesn't work, you can check into the credit counseling.

I would do my best to avoid bankruptcy if possible. When I worked for an auto loan company, we did not deny credit for late charges on accounts except for recently delinquent home and auto loans. Prior bankruptcies weighed heavily and could lead to credit denial depending on how old the bankruptcy was and having a repo could also hurt again depending on how long ago it was. Credit counseling did not lead to denials. But of course any and all of these might affect your interest rate. Medical bills were considered the least important and are usually the easiest to work out.

Good luck! These credit issues are difficult to sort out. Like someone else said it happens all of the time and the creditors will usually work with you.

 

[swea_pea1]

First, I have to say it makes me sad to read stories like yours so a great big to you! So many people go through exactly what you are, including me. You will get through this!!!!!

I think getting back on track is your most viable option, even though it doesn't look that way to you. I agree with Lisa F's advice to have your payment dates switched to make your expenses more manageable. Also, close that Christmas Club and put every extra dime you have on the bills. I used to be in that late payment/over limit charge nightmare, and it's not fun. You have to use that money for your bills.

Next, find other ways you can generate some cash. While you may not be able to take care of your bills that way, you may find help with day-to-day money so it doesn't seem so hopeless. Look around your house...do you have a collection of paperbacks or a lot of CD's you haven't read or listened to in a while? Sell them on ebay. If you have a lot of other stuff that you can live without, then have a yard sale instead when the weather lets up. You may make a couple hundred bucks that you can use for groceries or whatever while the other money goes towards the bills. You can also raise the deductibles on your car insurance to lower your payments or suspend 401(k) contributions to have use of that money now. While I'm a big believer in saving for retirement, it doesn't make sense to suffer now...you can start again when you're back on your feet. Also check the dependents you and your husband have claimed for payroll purposes. You may be having too much money taken out so that you can get the refund next April (guilty as charged! ). You may want to increase your dependents within the legal limit, of course, so that you can have more money now and less of a refund later. Roll your change if you haven't already. I'm always surprised that I find an extra $40 or $50 after I've done that. One other thing I did was to sign up with an internet survey company. Typically they only paid a couple dollars for each survey, but once I did a longer survey that paid $50.

I am also the queen of cheap meals...DH and I went through a particularly rough spot where we never paid more than $2 or $3 each for lunch and $5 or $6 on dinner for two. PM me if you need some ideas there.

I've been where you are and it's not hopeless! You can get back on track if you put your mind to it.

Good luck to you and again, lots of for you!

 

[Cindy B]

I think it was Ripleymom that stated that creditors can NOT call you at work, and other laws.

I do remember from a job (many years ago,so the law may have changed) that they can not call you every day, I think once a week. One time I got a call from GMAC, (the car payment "crossed" in the mail), and they called the second day. I read them the riot act, about that I gave them the information yesterday, and you called the NEXT day, isn't that excessive?

They never called again.


First work out the creditors... call them yourself, see what happens. I have been in the same place... when we moved from OH to PA. Our house wasn't sold (it was rented, but we never got a rent check), and we had an apartment... so two housing payments, credit cards, living expenses, etc.. did I mention I was 6 months pregnant with my DD?

Basically a month after my DD was born, I started waitressing. It was not a great situation, but it helped.

Then I read some amazing books, How to Live Debt Free by Larry Burkett, Your Money, Your Life (can't remember the author), Affluenza (great book!).

And I started being very frugal. Even in our "tight" state, we managed to save, (even if it was $5).

We wound up doing a snowball debt.. (ie gathered all the debt, finding the "lowest" one, and concentrating on that one... pay minimums on others. Once the lowest is done, concentrate on the next lowest one, etc...) We wound up calling the creditors ansd working with them.. some were great to us, and some weren't.

Now we only have car,mortgage, and no credit cards... the credit cards have been paid off for almost two years, and its a freeing feeling!

 

[my3kids]

If you are getting a large IRS refund, then too much is being withheld from your checks. Work with the personnel department at your employer to figure out how many exemptions would lead to just about as much being withheld as is due to the government. If you are getting a large refund, then the government is getting your money interest free for the year. Right now you need that money each paycheck to get your finances back in order.

 

[MICKEY88]

Originally posted by Toby'sFriend
Not only is it morrally problematic -- it will cause problems for your financial life in the future, especially if you want to buy a house. . [/B][/QUOTE] I have to disagree with this... it IS NOT immorral to file bankruptcy..

 

[snoopy]

My brother and his wife filed bankruptcy several years ago and are living in a $450,000 home, and drive cars that are leased. They seem like they are heading toward a 2nd bankruptcy pretty darned fast, too, since they seem to vacation more than anyone I know. I'm not sure how this happens, I do know that they make a good income between the two of them, but I have never understood why regaining their credit was so easy for them. An attorney friend of mine told me they are a good risk, since they can't file bankruptcy again for another 7 years.

I do think if its your only option its not the end of the world. At least it wasn't for those two, who live life high on the hog (and I don't reocmmend this, because as I said they are once again back in deep debt, having to work themselves hard to pay it all off). I'd talk to a good lawyer first and let him advise you on your options.