**cliffs notes at bottom** Long time no talk! I'll catch up with you all later on because right now my brother needs advice on his credit situation. He is 23 years old, has about 3 years of college under his belt. He is no longer eligible for student loans because of grades and length of time he has been there. He owed $11,000 in credit card debt last summer (with perfect credit since age 18) and then he lost his job and all of his accounts have to gone to hell since then. He tried consumer credit counseling 3 months ago and was unable to make last months payment ($330) so they cancelled him. Now the creditors are calling him again. Sooo, he needs "life" advice. He doesn't have his degree and doesn't have the money to go back to school so his income is going to be tight no matter what. He makes $10/hr and works full time, so after insurance and everything, he normally clears about $1100 / month. His car payment (another financial mistake) is $306 / month but that payment is over in March. He did a 5 year lease for $300/month when he was 18 and his last payment is in March. e has a cell phone that is $15/month (great company deal). Car insurance is $120/month. To get to the point, his credit card accounts are mostly 4 to 6 months behind and he is seriously considering bankruptcy. He owes about $15000 on credit cards from this past years's interest and fees since last summer. He has no assets and will not ask family for any help. He also owes $25,000 on student loans but our father told us he is paying $15,000 on each of our loans in 2.5 years so basically $10,000 on student loans for him. He needs advice on life. Should he file bankruptcy? **** cliffs notes here **** Victim: Brother, age 23 Total debt: $15,000 of credit card that is 4 to 6 months behind, $10,000 in student loans that have not started repayment period yet. Income: $10/hr (Clears about $1100 per month) Car payment: $300 (ends in march, can turn in lease) Insurance: $120/month Cell phone: $15/month He is seriously considering bankruptcy because his circuit city account discharges in 3 days and doesn't know if he should let his accounts simply charge off or go ahead file bankruptcy or if he should somehow try to become superman and recover all of these super late accounts or if it would just be easier and easier to recover from BK or letting them charge off. Thanks, Jason
I know it's not going to seem like it to him but $15K is not actually a ton of money, and the BK will be with him for 7-10 years, into his 30s when he may be wanting to get a nother car, or buy a house, or get a job that might require a credit check. Also, many student loans aer not dischargable through BK. He should consider swallowing his pride and asking a family member for help. He should also call the credit card companies and try to force them to lower his interest rates and drop late/OTL fees - if he is so far delinquent they may be willing to work with him. Lastly, he should look for a better paying job and/or a second job to help generate some more money. I am not anti-BK (I'm in one myself) but it just seems so different with someone that young and full of potential. Good luck to him Poochie
While 15K may not seem like much to you it is all relative and deserves individual consideration. Example: Whatever you filed your BK for would be peanuts if someone like Bill Gates was reading your story. The creditors were equally irresponsible and grossly negligent for throwing so much credit at someone so young. That's like giving heroin to an addict. Even if he could pay off the credit cards over 3 or 4 years he will have a crappy history. My vote is to do a Chapter 7 on the credit card debt. After discharge he can rebuild with secured cards, etc. and in 3 years easily have a 700+ fico. He has no chance of that happening by still carrying the credit card debt the way you suggest. File now at 23 and by the time he is 26 or 27 he will be much better off and hopefully learned his lesson. As for the student loans he might see a BK attorney for consultation about doing a Chapter 20 to handle that portion.
Um, well...chapter 20 won't help if they are federally backed loans...they are not dischargable except under certain very obscure conditions. From your tone I sense you think I'm blowing off his very real debt load. I'm not - $15K is not play money. HOWEVER - there are options that he can explore before he makes a really big decision. 4-5 years down the road it will be easier to dispute off the late accounts than a bk. And despite the very real success stories of people surviving BK and going on to have a great score in a year or two, for most it takes a long time, and even iof the score is up just the fact that there is a BK on the record will keep him from getting prime rates for certain things. A BK 7 is not an easy out, believe me, I know. People tend to think of it as a get-out-of jail free card, but it's much harder than that. Also, depending on his other expenses and the exemptions in his state, he may not even qualify for a BK 7. Again, take it from someone who's been there. And btw, I have student loans that won't be discharged, and I had less than $15K in CC. It can be a good solution, but in his case it doesn't sound like the only solution. I agree with you that CC are sharks who prey on the naivite of young kids who don't know how to manage their money. but unfortunately, they're not the ones that suffer - we are. So how about putting the attitude back in your pocket and attacking this constructively, eh? Poochie
For the record: 1. I am attacking this constructively and do not have an attitude. 2. I did NOT say Chapter 20 discharges the student debts. 3. I have personally prepared and filed nearly 100 Chapter 7 and 13 petitions (with full plans that were NEVER challenged by the trustee and used as a working model by major law firms). The point I am trying to make is that there are too many variables that only the debtor knows about, not us. You told him what you thought and I told the story from how I saw it based on my experience. I'm not rying to be 'right' and neither should you so stop taking my comments personally. What you say makes sense and we are only expressing opinions. The only opinion that DOES matter is the one of the person who must decide whether or not to file. My strategy is more aggressive than the recommendation you made and that's what makes a horse race. I know BK as someone who filed long ago and as one who helped others like you file. Based on the info that was shared my position is the same: go for the Chapter 7 and get rid of the credit card debt. On a comparison basis the student loans are much easier to deal with. I have no further response.
Ya know what - I like how you responded. My apologies if I took your earlier post too personally - my current BK makes me a little touchy. Have a good evening! Poochie
No problem. By the way, I was partially wrong about the student loans. They are easier to get discharged under Chapter 13 than most people think. Federal judges have a lot of latitude in granting them and will do so upon recommendation of the trustee. To increase their chances the debtor must make a supreme effort to complete the plan by making timely payments to show penance. After that any remaining balance is eligible to be written off. Of course all this really depends on what district the BK court is in and how generous the trustee and judge are feeling about applying the exception. Pro se cases often have a slight advantage, i.e. unless the BK attorney is 'connected' then anything goes.
It's interesting how much latitude there is in individual districts. I was told in my last state that there was no way I would be able to file BK 7 individually, despite the fact that my individual income was about $400/month. I moved, and my BK attny said there would be no problem filing, and I'm now 58 days into the deadline to object. The federal codes are the same, and yet there is huge gulf between trustees and BK judges' application of such. anywho...wonder what's going on with the OP
I agree with the other posters, 15K is a lot of money, but he will still be on the hook for the the student loans at least for 10K, so doing the BK still leaves a sizeable debt. My advice AVOID BK at all costs! Change his lifestyle, maybe get a 2nd job where all earnings go to pay down debt...in 3 years he can be debt-free vs. 10 sentence of BK on CR (PS: I too am not anti BK, but the amount involved is not too great, other alternatives exist...BK is a "last resort" )
