The new forums will be named Coin Return (based on the most recent vote)! You can check on the status and timeline of the transition to the new forums here.
The Guiding Principles and New Rules document is now in effect.
Bankruptcy Info
Kyougu
Registered User regular
Registered User regular
My mom just told me she is thinking of filing bankruptcy, and wanted me to find some info for her.
She's 50 years old, and quite a bit in debt. This is mainly due to early years of miss managing money. She has done debt consoidation, but she says its not working since collectors continue to harras her. (She suffers from depression, so this really gets to her)
She understands that she will still have to pay some of the bills, but she's not sure what else there is to bankruptcy? Any good info you guys can give would be appreciated.
She's 50 years old, and quite a bit in debt. This is mainly due to early years of miss managing money. She has done debt consoidation, but she says its not working since collectors continue to harras her. (She suffers from depression, so this really gets to her)
She understands that she will still have to pay some of the bills, but she's not sure what else there is to bankruptcy? Any good info you guys can give would be appreciated.
Kyougu on
0
Posts
Chapter 7 bankruptcy, which is complete bankruptcy, stays on your credit report for 10 years. She can work out arrangements with her creditors to keep her house and car etc and continue to make payments on those. Certain debts can not be discharged (some taxes, child support, student loans, etc). Chapter 13 bankruptcy, which is more like a payment plan, stays on your credit report for 7 years. It may be difficult to go this route depending on her situation.
If she only wants to do this to get rid of credit card debt then DON'T. Bankruptcy will stay with her for the rest of her life. It may come off her credit report after 10 years but lenders will always ask if she has gone bankrupt before. She will have problems getting loans and credit forever. I wish your mom the best of luck. My mom went through bankruptcy because of a divorce 8 years ago and she says it was the worst decision she's ever made (that includes the divorce).
Has she tried calling her credit card companies and explaining what's going on? Not that they're philanthropic saints, but by and large they want their money and if they think lowering her minimum payments will make that happen they'll often do it. They might be happier to do it if they can put a freeze on the account until she's caught up.
As nome said, she may be struggling but this really isn't something to be taken lightly. It really can wreck your life in a way that a terrible credit score can't. You can work your way back up to a reasonable credit score over time, but once you file for bankruptcy you can never un-check that box. So just make sure that she is considering all of this very carefully, and that if she goes through with it she is prepared for the consequences.
In a chapter 7 certain items are exempt, I believe it varies by state and I can't seem to find a list, but it usually includes household goods, clothes, a car and a place to live all of which must be under a total value cap.
A 21% interest rate isn't as bad as a 11% one, and she'll probably be more able to pay a $500 loan payment per month for a few years rather than a $1500 monthly credit card payment for probably just as long.
Edit:
Do not use credit consolidation services, they appear as bankruptcy on your credit report most of the time.
My mom went through bankruptcy too, to get rid of credit card debt, and after less than seven years, her credit score was thriving again. No problem getting credit cards or a car loan. She never tried to get a large loan for a house or anything, so I can't speak for that, but really, I think bankruptcy is common enough that it's not such a big deal to creditors anymore.
Also, has she given you an idea of how much this debt is?
Yup, you pretty much have to take what lenders give you if you're ever in a position to get a loan for a vehicle or anything else that requires financing short of school loans (even then you might be denied for private loans). For most people, once you file for bankruptcy, kiss your chance of owning a house, ever, good-bye without a huge down payment.
I mean, if you like paying for a house or car with a 25% interest rate, I guess it's okay. If this debt is less than $20,000 I don't see why they can't find a solution other than debt. Over that, you might have a hard time.
Credit card companies can be pretty flexible about repayment terms when the words "financial hardship" are mentioned.
I'm also curious what she did for "debt consolidation," because most debt consolidation offers are scams. The notable exception to that is debt consolidation based on home equity, where you mortgage your home as collateral and use the loan to pay off higher-interest debt. If she took out a home equity loan and now she's having trouble repaying that... well, that's a totally different situation than credit card debt.
the "no true scotch man" fallacy.
She owes 22,000 in debt through various credit cards. She got this much just basically through overspending earlier in the marriage with my dad. Right now the main bills are paid in time. It's just this credit card debt that gets to her.
Right now it looks like she wants to file Chapter 13. She wants to make payments get rid of the debt and she thinks that doing this will give her some breathing room.
She understands how this is going to look in her credit report, but she doesn't think she will need credit in the future.
I'm still not exactly if this is the right choice..but it sounds like an okay option.
it is *ALWAYS* worth the time to try and work out a payment plan with all the creditors. They would rather work with you than have you file bankruptcy. $22,000 in CC is pretty bad but I would spend a week or so seeing what she can do to avoid bankruptcy.
Everybody thinks this, and then your roof caves in - they do have to be repaired and even replaced periodically. Cars don't last forever - can she afford to buy her next car cash up front? Medical expenses, house repairs, car breakdown. A lot of things can happen that will either require credit or a considerable amount of cash on short notice.
Unless she's already in her 80's and can honestly say her car will outlast her, she'll need credit some day. As said above, she should take every possible action to prevent bankruptcy.
Actually, that last part is essentially the DEFINITION of loan consolidation, with the exception that you're not going through those potentially scammy loan consolidation businesses (who, it must be said, have to make money, somehow...) At the very least, it should make things more manageable, as credit card interest rates are usually ridiculous (unless you go for the ones with high monthly or annual fees, in order to lower your interest rate...)
Your mother should also at least try to ask around her family, if possible, and ask for some help. If it's affecting her mental health, and people in her family love her and can somehow help, even just a little, then she should not feel bad about asking for the help (or maybe you could ask around for her, especially if you have a better relationship with the family.) Better to be indebted to your family than to some credit card company or bank (unless your family is evil, somehow.) But maybe that's just my own generally healthy relationship with most of the people in my family; I know others don't always have it so good.
Check out my new blog: http://50wordstories.ca
Also check out my old game design blog: http://stealmygamedesigns.blogspot.com
Also, she will need credit. She just will, and even if she doesn't end up, you can't plan for things like illnesses, for example, and there may come a time when surprise! She needs a loan. Bankruptcy, even Chapter 13, should be an absolute last resort.
That should be, like everyone else said, completely manageable with an equity loan or second/third mortgage. Why did your mom and dad not split the debt on the CC when they were divorced(They were right?)?
猿も木から落ちる
at 18% interest that is 330 per month in interest..doesn't pay it down at all.
22000 * 0.18 = 3960 (yearly)
3960 / 12 = 330 (monthly)
add on 600 monthly for a place to live, 300 monthly or so for car payments, 400 monthly for food&necessities, 100 monthly for gas, 150 monthly for electricity/heating/water/phone/tv/internet bills
lets see thats 1880 per month, or 22560 after tax income, or about 30k as a before taxes annual wage.
Yeah you can fiddle the numbers a little, but if your not making near 30k a year the 20k credit card debt can easily be the straw that breaks the camels back.
This depends a lot on state law and the nature of the debt. Community debt laws are a little complicated, as I recently discovered for myself.
Anyway, I agree with everybody else: bankruptcy for $22k in credit card debt is a terrible idea and is a really easy way for her to get fucked ten times worse later on.
the "no true scotch man" fallacy.
Yeah I know. I figured I'd at least ask if it was considered of if she just inherited it from the divorce.