Drowning in debt. Please help!

Dear Dr. Stress,

I know you don't want to hear or read this but I think you are a perfect candidate for a Chapter 13 bankruptcy.

The chapter 13 bankruptcy is called the "wage earners" plan. This plan would not only stop the "interest bleeding" but it would also give you 3-5 years to pay on whatever debts you have.

No one at the hospital will ever find out unless you tell them. There will be no garnishments and the bk court does not call your employer.

What happens is that the your atty (and I advise you hire an atty to do this instead of paying the minimums on your credit cards) will present a plan to the bk court outlining a repayment structure that will depend on your net-net income after you pay all your necessary living expenses. Also in a Chapter 13 you would not lose any assets unlike in a Chapter 7.

The disadvantages in a Chapter 13 is that you must make a monthly payment for 36 months at a minimum. While you are in the plan you cannot invest in anything over $250 without the trustee's permission.

As for a mortgage...there are some mortgagees that will consider a Chapter 13 debtor to acquire a mortgage after one year of consistent and timely pmts but the interest would be higher.

You cannot discharge student loans, criminal fines taxes, alimony or child support in any type of bk (there are exceptions to taxes but I won't go into them as it doesn't seem to be a problem for you right now).

If you file as soon as possible you will enjoy as a right of law an "automatic stay". This means your creditors cannot call you, send you a bill or try to collect monies through collection agencies.

Bk 13s stay on your credit report for 7 years instead of 10 years in a bk 7. If 4 years is your time frame and you file ASAP then you will be out of bk by a year and it will be completely gone in 3 more years. There are many people here that have filed 13s so do a search and you will see that they were successful in cleaning up their credit very quickly after a 13.

I know you docs are really not great financiers as I was married to one. Trust me you will not be shirking your honest debts in a bk but you will be avoiding the 20%+ in usurious interest rates.

If you have any more questions I will be happy to answer them for you in more detail.

clc

PS Atty's fees should be in the $1,200-$1,500 range depending on where you live.

 

Here's the thing; in the insane world of credit cards, they won't work with you or help you in any way until you get six months (180 days behind). In short, they're idiots. There are a lot of people who delared Chapter 7 BK, thereby making them (the credit card companies) write the entire loss off, when they could have called the dogs off and gotten their money eventually.

You say you are managing to make the minimum payments. Does this statement apply to all of these cards? If so, then here is what I would suggest. I'm sure others will disagree, but here goes:

Pick out the highest interest rate/highest payment card and ignore them for six months. I did that a few years ago. Once it hit chargeoff status, then they were suddenly willing to "work" with me.

 

Re: Re: Drowning in debt. Please help!

Do you belong to a credit union? Sometimes they'll help you when no one else will, because you can sit down and explain it.

Explain it to them like you explained it here. Tell them if you can get all of these bills consolidated at a decent rate, you can easily afford the payments, and that when you get out of school and have a better income you can even accelerate the payments.

It may not work, but you don't know if you don't try.

 

Re: Re: Re: Drowning in debt. Please help!

No, one credit card company doesn't care a bit about your status with any of the others, assuming that you don't have more than one account with a given company. I would strongly recommend that you NOT declare bankruptcy over unsecured debt. Bankruptcy is generally for someone who is going under and wants to keep the car, the boat, the motorcycle, etc...

The actual best course for you is to get a second job and just stay current with all of them. The previous poster also had good advice about the credit union. One VERY important thing to remember, though, is that you need to do this BEFORE your credit gets trashed by the CC companies. Believe me, if your credit union will loan you money to bail you out NOW, by all means, take them up on it. That's the first thing I would try. If none of the above ideas are feasible, then I would use the previous advice and ignore one of them until they get real. That way, it'll give you a six-month breather to get your act together. Of course, you'll have lates of 120+ days, but it'll only be on that one account, as opposed to having that on all of them.

Technically speaking, they can sue you, seek a judgment, etc.... but it's rare for them to do so without trying to work it out with you first. Besides, they'll sometimes actually decide to work with you before the 180-day period is up, but don't be surprised if you keep getting the "we're sorry, but..." chorus until then.

Hope this helps.

 

Re: Re: Re: Drowning in debt. Please help!

Stress,

By the way..... I went back after I had posted and noticed that your biggest one is with First USA. I won't try to alarm you with horror stories, but I do have a bit of background with them. Drop me a line and I'll tell you more:

techie4@comcast.net

 

Re: Re: Re: Drowning in debt. Please help!

Dear Stress,M.D.,

In answers to your questions:

1. You lose no assets in a Chapter 13 bk. Your car is safe and you get what is called an exemption for it. I could tell you how much but it differs from state to state. Some states allow you to take the Federal exemptions or the state exemptions. Some states don't give you a choice. So I would have to know what state you live in.

2. I am assuming you have car insurance now so keep it. The insurance company doesn't have to know you're in a bk 13. In fact car insurance is considered a necessary expense.

3. No what I said was you would be in a bk 13 plan for a minimum of 3 years (36 months) but it can be extended to 5 years. It goes on your credit reports about a month after filing. The clock starts then. So after 36 months you have completed your plan the bk will only be reported for the years remaining. So in a 3 yr plan it will report for 4 more years but in a 5 year plan it would only be 2 years. But you can usually start repairing your credit a year before your bk 13 is discharged and 2 yrs after discharged you shouldn't have a problem getting a mortgage especially with a MD and working in a well developed practice.

4. Those expenses should be included in your plan. The secret of a bk 13 is to put every expense you incur on your financial dislosure.

5. No you do not have to live in the slums. There are people with very nice, big and expensive homes in a bk 13. The reason is you do not lose assets in a bk 13. Therefore everything you own is safe.

DO NOT GO TO CREDIT COUNSELING. THOSE SERVICES ARE WORSE THAN A BK! (READ MY LIPS) DO NOT GO TO CREDIT COUNSELING! (where do you think they earn their $$s...Ding, dong...credit card companies!

I would not advise going to a credit union and borrowing more money. If you file a bk 13 the balance owing on your credit cards are snap shots. That means no more interest is accruing. If you borrow to pay unsecured debt you will just be adding interest on already interest heavy debt.

If you want to email me privately my email is hon1l@aol.com. I would be happy to answer your questions. I used to be a the head paralegal in bankruptcy at large firm in Philly now I'm a 1st year law student who has realized how dumb I am...lol. But this is why I think you're a perfect candidate for a bk 13.

So if you want to communicate your situation privately then give me a holler. I would be happy to set you in the right direction.

clc

PS the poster who advised you to get a second job obviously has never followed an intern or resident around. Some programs don't even allow interns and residents work outside jobs. Plus you have to study for your boards. The purpose of a bk is to give you a "fresh start"...plus a 13 does pay your creditors back...they just don't keep getting 20%+ in usurious interest rates!

 

Re: Re: Re: Drowning in debt. Please help!

If your debt is twice your income your a good candidate for BK. CH 7 is the way I would go or stop paying and negotiate when they charge off.

CH 13 is gonna mess up your credit anyway so why bother paying and still have low scores.

With all the money you'd save without any payments you could still live in a nice area. Instead of paying your cards, pay yourself and soon you'll have plenty of money to pay cash for things.

You should get a consultation with a BK lawyer and see what options are best for you.

 

Re: Re: Re: Drowning in debt. Please help!

Guys, I don't mean to sound argumentative, but why are you suggesting the bankruptcy route for him? This is all unsecured debt.

What would you prefer?

A. Bankruptcy, which will mar his credit for 10 years (less for Ch. 13, I know), plus appear in his public records for many more

or

B. One defaulted credit card account out of several?

If he hangs in there, whichever account he chooses not to pay will eventually get a grip and lower his interest rate to something less than punitive, even if he has to incur some slow credit marks with them in the meantime.

That makes more sense to me. If I'm wrong, someone please correct me so I can learn something here.

 

Re: Drowning in debt. Plea

I'm curious now. What makes you believe that these companies will NOT file for a judgment? Does everyone here agree that someone can stop paying unsecured debt, with no consequences (except FICO?)

 

Re: Re: Re: Re: Drowning in debt. Please help!

Agreed. They're collection agencies in disguise.

One note about this: if he takes out a loan and pays these cards off, then this will also take a "snapshot" of the card debt. That is, no more interest will incur on these cards.

Please note that I said if this is feasible. I fully understand that it very well may not be feasible for him. No problem. Now, about the "fresh start" with a bankruptcy....why is it that, in several surveys, about 95% of people who have declared BK say that they would never go through it again? That speaks volumes to me.

Why on earth should he suffer the hell of a BK if he could have gotten a consolidation loan at a credit union at a much lower interest rate???!! This would give him the breathing space he needs, plus keep his credit intact, plus show all of his credit card accounts as paid off, thereby improving his credit!!!

Maybe I'm just dense, so please educate me here. I just can't seem to see your point.

 

Re: Re: Drowning in debt. Plea

I'm not saying that they won't file for a judgment. I'm saying that there's a very good chance that they'll work with him before it goes that far. They'll offer him an "assist" program, a "re-age" program, or whatever that particular company calls it. They've always done it for me when I wasn't able to make payments.

The risk is always there that they'll go after him legally, but I really don't think they would just dive right into that without calling off the dogs first and trying to get him back on track with a lower interest rate for a year or so.

Every case is different, of course, but I do speak from personal experience.

 

Re: Re: Re: Drowning in debt. Please help!

Ok Struggler-
You're wrong! So your financial and legal theory is that doc should just get one credit account in discharge and/or unpaid status which we all know will eventually go right to his CRA. So he would have two negative tradelines; one for the OC and one for the CA. But in your logic the other three creditors will be so intimadated by his machismo in sticking it to his largest creditor that the others would rush to the phone and beg to negotiate??@@##!!

For everyone in this room who has been successful in using this technique, PLEASE raise your hands.

Doc, you are a bk candidate. You have two options. On the face of the info I would go for a 13 but if I knew more about your situation I COULD detail the pros and cons of each chapter fairly articulately.

You have my email.

clc

PS Struggler...consolidating debt to pay interest debt would compound more interest rate payment. What he NEEDS is a way to stop the hemorrging interest rates. BK is by far the best wat to deal with unsecured credit debt. If he has $120K in sudent loan he would soooo SOL.

 

Re: Re: Re: Re: Drowning in debt. Please help!

clc,

Without getting into any childish flaming here, I think you're dead wrong on several points:

1. I've never had a credit card account go all the way to an outside collection agency, and THIS WAS AFTER BEING CHARGED OFF AFTER THE 180-DAY PERIOD! I'm sure it eventually would, but if you'll actually read my posts, I'm not talking about letting it go that far. What I'm saying is that they'll work with him after a few months when they see that he cannot make the payments. I didn't say he should ignore it FOREVER! I just said, again, that they'll work with him when the account starts going bad. Even if it DID go that far, TWO defaulted accounts (the OC and the CA) would still be better than a bankruptcy!

2. Again, if you'll actually read my posts, what I said was to REMAIN IN GOOD STANDING WITH THE OTHER CREDIT CARD ACCOUNTS!!!!! Don't believe me? Go back and read it again!

3. I never said one word about the other credit card companies caring one iota about what's happening with the defaulted one. They don't care a bit. I never said that in the least. Again, read what I actually wrote.

You keep praising bankruptcy to the moon here. I'll bet there are plenty of people who have actually been through one that would disagree.

I'm no expert and have never claimed to be, but you're clearly and obviously pushing bankruptcy at him. Granted, he may eventually get to that point whether he wants to or not, but he should definitely explore some other options first. Why are you worried that he might find a better way? You seem to want him in an attorney's office bright and early tomorrow morning.

Now the REAL question: Why are you pushing him toward a Chapter 13, also known as the "Sucker's Plan™?" Wouldn't it make more sense to file Chapter 7 and unload the debt instead of paying all of that money to creditors and STILL destroying his credit?

Thank you for the sarcasm, though. It was quite refreshing.

 

Re: Re: Re: Re: Drowning in debt. Please help!

I sent you a response last night, Stress. It was a bit late so you might not have seen it yet.

I think you have the right idea. It would probably take more than one account in default to get the payments that low. In my experience, you probably won't have to write them. Believe me, they'll be in contact with you (and how!). They'll offer you a "re-age" or "assist" program, but not at first. As sad as it sounds, they'll try to hang onto their 20%+ interest rate as long as possible. The unfortunate thing is that your credit will take a hit before they'll listen to you.

 

Re: Re: Re: Re: Drowning in debt. Please help!

I'm giving this a BUMP so that maybe some more seasoned veterans can chime in and help.

Anybody else with some advice or suggestions?

 

Re: Re: Re: Re: Drowning in debt. Please help!

Dear Stress,

I commend you on wanting to pay back your debt. You've heard from the other contingents, now here's my plan for you.

You probably won't have the time in the next 4 years to have much fun anyway, so think about sucking it up, tightening the belt even further, and giving up all earthly pleasures for 4 short years. Think of all that extra time and energy you can devote to becoming the best doctor you can be.

Work on decreasing your expenses - get a roommate, get two roommates, don't eat out, wear clothes till they fall off of you, use public transportation if you have to. Put every extra cent towards paying down your cards.

Pretty soon, you should start getting some cc offers with low or zero balance transfer options. Transfer your highest interest card to one of these new cards to get a little breathing room. Even if the low/no interest lasts only 6 months, that's hundreds of dollars you'll be able to apply to other cards, which may soon get you another low/no interest BT offer. And even when the low BT rate expires, the regular rates on the new cards shouldn't be as high as what your're paying now. My credit sucks and I'm getting offers of 0% BTs and 15% thereafter, as long as payments are made on time.

Before you know it, you'll be out into the real world with less debt, great credit, a great job, the ability to easily pay all your debt, and absolutely no limitations to what dreams you can fulfill. Best of luck to you.

Sincerely,
PollyAnna