alternative to bankruptcy

[kdowd771]

What is the name of your state? Texas

Are there any alternatives to Bankruptcy out there? I have $40,000 in credit card debt. No assets. Can't get a consolidation loan. The debt management companies portray themselves as a better solution to filing chpt 13 (which is what I qualify for) Is this true? Is a debt managment company better than filing chpt 13?

 

[Ladynred]

Unfortunately, the answer is no, at least not in most cases.

These debt consolidation/negotiation/management places make a LOT of money off of people while trashing their credit beyond belief. They charge outrageous fees, and even the ones who claim to be 'non-profit' have these very convenient 'donations'.. which turn out to be MANDATORY... some donation, huh ?

If you decide to go this route you must be VERY careful and VERY diligent. You basically have to go thru their terms and conditions with a fine-toothed comb and monitor them very closely. These places are bad for routinely making payments late, NOT making payments, not making payments large enough to make any headway or incur more finance charges. Some places will hold ALL your money until an account is near charge-off and then try to settle (without any negotiation on your credit report entries, I might add !). At that point, your credit is totally trashed, you might as well file for bankruptcy. They'll probably also tell you that it'll take 5-7 years to pay off your debts in their program.. and those estimates don't always turn out well either.

You might want to read about these kinds of places here:

http://www.creditinfocenter.com/debt/DebtConsolCompanies.shtml

Its not impossible to find one that works, you just have to be extremely careful and monitor everything that's goes on.
There's also not guarantee that all your creditors will participate, they don't have to.

I've seen so many horror stories on this board and others that I dont' think I'd ever use one of these places. There are some who've had good experiences, so they do work, but they seem to be few and far between.

 

[bastrick]

READ THIS BEFORE YOU SIGN UP WITH A GET OUT OF DEBT COMPANY

I've heard that major creditors own a lot of those companies. I have a friend who tried one of those "not for profit" companies four years ago. One of her cards was Sears. It had an almost $800 balance going in. She was paying $300 per month to cover all her debt. The portion that went to Sears was $50 per month. Twelve months later, after $600 going to Sears, her balance at Sears was reduced by $5. Not a mistype. $5. Sears didn't stop charging over balance fees or late fees. $25 each fee per month. $600 in fees plus interest. I compared the statements myself. I couldn't believe it. All of the card companies did her similiar so she filed Chapter 7 because she felt she had no choice. It would have taken her over twelve years to pay off at the rate she was going. The only people that won that year were the card companies that got all of that interest and those fees. The only thing that company did for her was to delay the inevitable.

 

[dcc]

thats what my lawyer told me, that they will take your money for a couple years then tell you to declare bankruptcy.

 

[dawnnish]

As I've posted several questions(just today, for one) on this subject, I hope maybe I can return a favor or two with this response. Back in October('02) when I realized I was getting in WAY over my head but still reluctant to concider bankruptcy I tried taking a 2nd part-time job at night:ironically enough, it was in a call-center for a debt concolidation agency down here!(life is bizzarre at times) I even made an attempt to consolidate myself, which turns out I still couldn't handle payment-wise BUT, I did learn several things:

While I would not, knowing what I now learned, make a "blanket" statement saying do or don't I CAN say that there are times it can help and times it cannot. I would say 90% of both my inbound and outbound calls were the "would not", yet the other 10% I say ARE better off. For those I spoke to trying to make one monthly payment and maybe lower some interest rates, it was a decent idea. For most, myself included even the minimum required negotiated payments were too high for me(a misconception is they are negotiable-but creditors have their own flat minimum acceptable terms) Having said that-I found that not all were "crooks" per se- but usually if you've reached that point you've gotten in too deep already.

 

[kdowd771]

Yea I pretty much have FINALLY realized I am in WAY TOO DEEP. Does not matter that I am going through a divorce and 3/4 of this debt was hers. I still wanted to take responsibility for payng of the debt. But it is too much of a burden for me to handle. No other alternative but to file bk trying for a 7 but not sure if I will get it or not,

 

[cyana]

kdowd771

I assume you do know that if you file C7 on any of her debts or joint debts the creditors will come after her; creditors are not bound by a divorce decree. It is said, however, on this board and others, that if you name her as a creditor (and include her on any joint debts as a co-debtor), your ex should not be able to "sue" you for not abiding by the terms of your divorce decree. Never put to the test though; my ex said upfront that he refused to divide the marital debt so we both had to separate declare bk C7's.

 

[PixieStix]

Consumer Credit Counseling

Consumer Credit Counseling is a non profit organization that my parents used when they were 50K in debt and they paid everything off in 3 years with them. This company was very good for them. Most of their debt was credit card debt my father ran up. Things were renegitiated with the credit card companies and it went rather smoothly. But Im sure that isnt the case for everyone.

Such as myself, I tried one I found online and the guy I talked to at the beginning I later found out was just a suave "salesman" to convince me this would solve all my problems. They were very unavailable for assistance after that. Charged a monthly fee with my payments for their services. They also claimed they had a legal department to handle any creditors that tried to pursue filing a judgement on my debt and would be able to take care of it for me, which turned out to be very unhelpful when one actually did file suit. All in all I paid into them for about 3 months and they only sent payments to half of my creditors and even then one of them they were only sending $5.00/mo. That wasnt going to get me anywhere with mydebt with all the interest continuing to add up.

I recommend CCC based on those that I k now who have gone with them, the reason I chose to try the one I did was because they didnt report that I was consolidating on my credit report and CCC does. Mine was a disaster and after I pulled out on my agreement with the online one, none of my creditors would renegotiate with another company so Im now in the process of filing BK.

Although Im not sure if CCC is in every state. That is something you would have to look into. And it may not be the best option for you depending on what your situation is. But I hope my experience gives you a bit more information on the options.

Pixi

 

[kdowd771]

Well I go to the lawyer in about an hour to attempt a chpt 7. I had gone and did a preliminary estimate on what I can do (7 or 13) He said that I would end up paying back 100% and would only qualify for a 13. but after talking with some folks they advic3ed me on some things that would qualify me for a 7 instead. I did not know thta you could list a family member as someone you owe money to. I definetly want to pay them back. Hopefully this will now qualify me for a 7. Is there anything that you can do that will make the difference between a 7 and 13? If I am going to shoot myself in the foot I want to do it right the first time!!!!

 

[Ladynred]

There are a couple of 'big things' when it comes to 7 vs 13.
Ch 13 is usually for people that have a lot of assets that would be non-exempt or above the exemption limits of a CH 7. People with assets to protect file Ch 13.

The other big factor in 7 vs 13 is disposable income. If you have a lot of disposable income per month, you're going to end up with a Ch 13 because the Trustee sees $$$ to pay back creditors. The less diposable income you have the better your chances are of getting a Ch 7. The biggest mistake people make in this case is to seriously underestimate their expenses. Lots of things that can be included get left off and it looks like they have more disposable income. The problem there is that they get pushed into a Ch 13, and later, when those 'forgotten' expenses come up, they can't make their plan payments. The 13 gets dismissed for non-payment or they have to convert to a Ch 7. Ch 13 failures are something like 60-70%.

So... rack up the expenses as high as your attorney thinks is tolerable and you'll have a better crack at Ch 7.

Yes.. you can include ANYONE you owe money to, including family. Filing for BK doesn't mean you can't pay them back after your discharge - just don't pay them anything BEFORE you file - that would be a 'preferential' payment and the Trustee would want it back.

Good Luck !

 

[kdowd771]

Ladynred
Thank you so much for your words of wisdom on this subject. I am leaving right now to go to the lawyer to fill out the paper work. After looking at some of your other posts, I see I did what everyone else it seems does. SEVERLY UNDERESTIMATED MY NORMAL EXPENSES!!!! After looking at your suggestions I have changed the expense sheet and have come up with a significantly higher normal expense number. Disposable income is now in the negative.
Will let you know how it turns out.

thank you again!!!