Bankruptcy??

[NexlevMM]

Hi guys,
I have a dilemma that I'm trying to deal with, and all I could think of was go to the wise gents at B&B for advice.

Story: When I was younger(20) I ran up a few credit cards, got a car loan, and financed a bunch of stuff I didnt really need, and at the time my credit was great (747 score) and i had great income coming in, nearly no overheard, and was about to start living on my own. My parents needed help getting a new house, so I decided to co-sign a $200K House with them and stay in another year. Well, things got bad, i lost work, became self employed and that was even more stressful, and my parents couldnt afford the house so they short sold it. So now im pretty much looking for another job just to stay afloat.

I just turned 24, and I feel like even if i got another job I'd still be playing catch up for years to come to pay off the debts I have and fix my credit. I spoke with my dad, and he said since that short sale was the nail in the coffin, that I should file BK and just start over from scratch. But Im freakin young, I dont want that type of thing on my history! Or am I being too proud? Should I just file, get a good job, and start fresh like the last 4 or 5 years never happened?? I really want to get out on my own already but that wont ever happen with the debt I have now.

What the heck should I do???

 

[roklein]

With all due respects, you need to seek the advice of a financial advisor.

 

[NexlevMM]

With all due respects, you need to seek the advice of a financial advisor.

Already set the appointment, but i was hoping on some insight from the guys on here. What would you do?

 

[DougieB]

And an attorney. I wish you all the best in weighing your options and coming to a decision.

 

[Face&Head]

Before I would consider bankruptcy, I would try to negotiate with your creditors. Sometimes this is better handled by a 3rd party. It sounds like your credit is already impaired but recovery from that, if you are able to meet your (hopefully renegotiated ) debt service, is not that long. You're right to be cautious about bankruptcy. Was the short sale bank approved? Is the mortgage lender seeking to recover all their loss from you (including unpaid interest & fees)? It sounds like your parents are/were in a tough financial situation as well but they should be participating in any judgment against you for that mortgage. Finally, remember that not all debts are discharged in a bankruptcy so you can further damage your credit while at the same time not get out from under all the obligations.

 

[pipskicks]

while I think the advice here is great, I think the OP wanted moral advice (am I right?) but this I can not answer.

 

[DC_MPA]

I had a family member in your shoes. He went with the bankruptcy and said it was the easiest thing they ever did which pissed them off at how easy it was. Hired an an attorney, they filed the paperwork, set a date with a judge, even told them the questions te judge would ask verbatim (and it was accurate), and they said start to finish they were in and out of court in 30 minutes - everything wiped clean. The only thing they lost was pride and respect of the system. Physically nothing changed in their life except the credit score.

 

[the_edski]

Weigh your options. I agree with DC, bankruptcy as a word has a very bad connotation, but it is NOT a death sentence. If you play your cards right and get good advice and a good lawyer and do everything by the book, you will come out ahead in the long run!

 

[roklein]

Already set the appointment, but i was hoping on some insight from the guys on here. What would you do?

What I suggested. Hold tight and weigh all of your options as mentioned. This came at a bad time when the job and housing markets have tanked. Maybe invite your parents along for a financial portfolio review as well. I'm not trying to be funny but maybe your parents need some guidance too? At 24 years old, you do not need this type of stress in your life. Whether you agree or not, you're still a kid.

 

[NexlevMM]

Hahah thanks for the notes guys. Yes i'm well aware that my parents need a financial education way more than I do. I already discovered the error of my ways the first time, but i dont think they have.

Not in need of moral support, i just dont wanna deal with trying to pay off all this debt while still trying to get out on my own. So from an adult financial standpoint, where should i go from here?

 

[mmack66]

I'm the last person that should be giving anyone financial advise, but from an adult financial standpoint, the most adult thing to do would be to work your *** off and pay off your debts.

 

[Slash McCoy]

First of all, keep in mind that the intended purpose of bankruptcy is to get a chance at a fresh start when servicing one's debt becomes impossible. It is a last resort, not an easy way out of paying for decisions that didn't work out. Too often in years past, the bankruptcy option was used too liberally. A couple of years ago, bankruptcy law changed quite a bit, and it isn't so easy to just liquidate and blow off all the creditors with whatever assets you have.

Bankruptcy does not necessarily destroy your credit. In fact, many lenders consider you MORE credit-worthy when you come out of bankruptcy proceedings. Watch... if you do choose to go that way, you will be bombarded with offers for car loans, mortgages, and credit cards. Of course you will by now or by then realize what a trap easy credit can be.

Few things in life are so satisfying as making that last payment in a long struggle to pay off your debts. The hard work and sacrifice will be a source of pride and accomplishment. The lessons learned will come in handy later in life.

A good lawyer and a good financial advisor need to review your situation to help you decide what to do. They will know the questions to ask and the documents to look at. They will know what sort of deal they can make with your creditors, and they will have more credibility than you, approaching the banks with a settlement plan. If it only costs a grand in professional fees, it will be a good deal. If it costs more, well, it is probably gonna be worth in just in what you will save by settling with a payment plan you can afford.

I suggest, as an excercise in discipline and control, that you absolutely NOT buy or pay for ANYTHING with credit for a set period of time. Maybe 6 months or a year. At one time, most ordinary working folks didn't have, need, or want much if any credit. Drive an old beater and pay cash for it. Don't buy a house on a note... look for alternative housing arrangements like renting, living with your folks (who, after all, helped get you into this mess) or living on a boat or in an RV or small trailer. I am quite comfortable living on my little sailboat that I bought for 2k cash, even though it is a bit crowded. My marina slip works out to $150/mo and I have to carry a $320/year insurance policy against salvage, etc should a hurricane totally wreck the marina. My utilities are next to nothing. My light bill runs between $8 and $70/mo, depending on AC use. Plus, I can live on my boat, but I can't sail away in a house. I get enjoyment out of my boat, too. Breaking out of the mold housing-wise was a good move for me. My option would not be as attractive for a family but for a bachelor I find my personal solution to be perfect. Just illustrating that you don't need a mortgage, and you shouldn't take one if the time is not right. New car? Your comprehensive policy that the bank will require you to take out will be almost like paying for another car but only getting the one. Transportation doesn't have to cost you $800 every month. My old 2004 Ranger still runs great and gives absolutely no trouble, and I won't be buying another vehicle until this one goes to truck heaven, and when I do, I will pay cash, whether new or used, so I have the option (good or bad idea, up to you and YMMV) of purchasing only the minimum required liability policy. You CAN live without credit, and often it works out cheaper, better, easier. Try the creditless approach for a while. It will help you a lot.

 

[NexlevMM]

First of all, keep in mind that the intended purpose of bankruptcy is to get a chance at a fresh start when servicing one's debt becomes impossible. It is a last resort, not an easy way out of paying for decisions that didn't work out. Too often in years past, the bankruptcy option was used too liberally. A couple of years ago, bankruptcy law changed quite a bit, and it isn't so easy to just liquidate and blow off all the creditors with whatever assets you have.

Bankruptcy does not necessarily destroy your credit. In fact, many lenders consider you MORE credit-worthy when you come out of bankruptcy proceedings. Watch... if you do choose to go that way, you will be bombarded with offers for car loans, mortgages, and credit cards. Of course you will by now or by then realize what a trap easy credit can be.

Few things in life are so satisfying as making that last payment in a long struggle to pay off your debts. The hard work and sacrifice will be a source of pride and accomplishment. The lessons learned will come in handy later in life.

A good lawyer and a good financial advisor need to review your situation to help you decide what to do. They will know the questions to ask and the documents to look at. They will know what sort of deal they can make with your creditors, and they will have more credibility than you, approaching the banks with a settlement plan. If it only costs a grand in professional fees, it will be a good deal. If it costs more, well, it is probably gonna be worth in just in what you will save by settling with a payment plan you can afford.

I suggest, as an excercise in discipline and control, that you absolutely NOT buy or pay for ANYTHING with credit for a set period of time. Maybe 6 months or a year. At one time, most ordinary working folks didn't have, need, or want much if any credit. Drive an old beater and pay cash for it. Don't buy a house on a note... look for alternative housing arrangements like renting, living with your folks (who, after all, helped get you into this mess) or living on a boat or in an RV or small trailer. I am quite comfortable living on my little sailboat that I bought for 2k cash, even though it is a bit crowded. My marina slip works out to $150/mo and I have to carry a $320/year insurance policy against salvage, etc should a hurricane totally wreck the marina. My utilities are next to nothing. My light bill runs between $8 and $70/mo, depending on AC use. Plus, I can live on my boat, but I can't sail away in a house. I get enjoyment out of my boat, too. Breaking out of the mold housing-wise was a good move for me. My option would not be as attractive for a family but for a bachelor I find my personal solution to be perfect. Just illustrating that you don't need a mortgage, and you shouldn't take one if the time is not right. New car? Your comprehensive policy that the bank will require you to take out will be almost like paying for another car but only getting the one. Transportation doesn't have to cost you $800 every month. My old 2004 Ranger still runs great and gives absolutely no trouble, and I won't be buying another vehicle until this one goes to truck heaven, and when I do, I will pay cash, whether new or used, so I have the option (good or bad idea, up to you and YMMV) of purchasing only the minimum required liability policy. You CAN live without credit, and often it works out cheaper, better, easier. Try the creditless approach for a while. It will help you a lot.

Totally on the same page with you. After all the issues that came about with financing, i understand cash is king, have savings before you have debt, shoot i have more finance books than i can shake a stick at now. Thanks for your post.

 

[ackvil]

Some things to consider.

The Cons:

1. Bankruptcy will be on your credit report for seven years. That means that for seven years most likely you will not be able to get a mortgage and if you get a credit card you will have a lower credit line.
2. You will lose all of your credit cards and many of your possessions that are not exempt under state law.
3. You will not be able to file for bankruptcy again for, I believe, six years so make sure this is the right time to do so.
4. There are certain debts that are immune from bankruptcy (in some cases mortgage liens, alimony, child support, taxes, student loans, etc.)

The Pros:

1. It stops all collection action by creditors.
2. Depending on state law some of your possessions may be exempt (e.g., your home, car, tools.)

In brief, consult your attorney.

 

[DC_MPA]

To add to Ackvil, my family members attorney told him that as scary as it sounds, once you file for bankruptcy, you will get flooded with credit card offers. The attorney advised to go through them and find the best one and get it. This is an immediate way to start rebuilding your credit. True enough, it worked very well for my family member. It's all in how you play your cards. As the old saying goes, there is only three things you need in life, a good doctor, a great financial advisor, and a terrific attorney.

 

[Doc4]

Okay ... talk to the bankruptcy professionals in your area, who know the local laws and who can spell out the pros and cons of the available moves.

But Im freakin young, I dont want that type of thing on my history! Or am I being too proud?

Here's where we can help you.

Treat this not as a "pride" thing but look at all the options rationally, from a dollars and sense viewpoint. Forget about any stigma that you think might be there ... in this day and age, it's not. But some careers may be closed to you, either formally or perhaps informally.

Once you have the options laid out and explained, and you make your decision, then you need to have the pride kick in ... do your level best to make the most of the rest of your life. (Insert graduation speech platitudes here.) Your motto: "okay, that sucked ... let's make the rest of my life something to be proud of".

 

[OldSaw]

Some things to consider.

The Cons:

1. Bankruptcy will be on your credit report for seven years. That means that for seven years most likely you will not be able to get a mortgage and if you get a credit card you will have a lower credit line.
2. You will lose all of your credit cards and many of your possessions that are not exempt under state law.
3. You will not be able to file for bankruptcy again for, I believe, six years so make sure this is the right time to do so.
4. There are certain debts that are immune from bankruptcy (in some cases mortgage liens, alimony, child support, taxes, student loans, etc.)

The Pros:

1. It stops all collection action by creditors.
2. Depending on state law some of your possessions may be exempt (e.g., your home, car, tools.)

In brief, consult your attorney.

While a bankruptcy filing may only stay on your credit report for a limited time, it is still a permanent part of your financial history that MUST be disclosed if asked (eg. have you ever filed bankruptcy?) on any future loan applications. If not disclosed it is considered fraud and could have very serious consequences. Bankruptcy is a measure of last resort, not a quick fix to a temporary problem.

Are you being sued by creditors or is it just tight trying to manage your finances? It sounds like your parents are willing to let you stay on and it also sounds like they owe it to you. I would take advantage of living with your parents and pay this thing down. If you don't change the way you are managing your finances a bankruptcy will only restart another episode of problems.

There are different bankruptcy chapters in the tax code and an attorney who specializes in this sort of thing is needed to determine which one you qualify for. Anything other than chapter 7 and you will still probably have some serious payments to make.

 

[DC_MPA]

We as people have to treat bankruptcy just like the corporations do, as a financial tool to enhance profitability and/or financial freedom to make different decisions. Companies file bankruptcy routinely and don't think anything about it, consumer bankruptcy is nearing the same way. Before the laws changed it was routine for last semester law students to take bankruptcy law courses and the professors would walk them thru maximizing debt and distribution of debt and walk them thru their own bankruptcy filing so when they geaduated they had new cars, zero student loan debt and everything to successfully get their feet sunk into top jobs upon graduation. Sad but very true. I knew many lawyers who have told me that story.

 

[scottish steve]

My father said he struggled, lost sleep, became embittered with friends and worked his butt off to service his business debts and at one point thought "What's the point of suffering for the next 10 years of my life?"
He became bankrupt and never looked back. He told me it was easy and as soon as it was done he could start living again. Of course, this was twenty years ago and within The Scottish Legal System, which might be quite different. He didn't seem to lose any property. Things might have been tightened up since then- it seems it's ok for corporations to just put their hands up and bail out, but not the people they put out of work.

 

[jazzman]

The most important thing you can do is to follow all of the above advice, to the letter, as soon as possible. Try to ignore the fact that almost every suggestion is contradicted by other posts.

Or go with your original idea of consulting with qualified professionals. The choice is yours, but I'm just sayin'... .