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    My situation...

    Hi all,

    Just signed up because unfortunately I've come to a point where I think I need to seriously start looking into personal bankruptcy and this place seems like a great resource.

    Here's my book, I'll try to put in as much relevant information as possible. I'm trying to figure out if this is something worth pursuing given my situation.

    - 27 year old, single male.

    - I own a 2005 Nissan Altima that is paid in full, I own it. I have no other assets. I rent an apartment and own nothing else with a value over $1k.

    - Net monthly pay is $2,100.

    - $63,000 in student loans (13k is federal/fixed interest, $50k is private/variable interest). I pay about $600/mo. I know there is basically no chance that student loans are erased in bankruptcy.

    - My father and I own a small business. It has been a struggle the last four years and obviously with the economy the last 6-8 months things have really been especially hard. Things were starting to go really well until Sept/October when a ton of our clients (SMB) started going out of business, but we're trying to fight through the tough times and bounce back. I have so-so benefits (which obviously means more out of pocket expenses), never get paid on time (I get paid when the clients pay) so I'm about 3 weeks late on all my payments each month and because my student loans are so large I never got a chance to get a month ahead with a little cash in the bank. Also, because it is essentially just my father and I running the business I do not have time to get a second job for added income, 60-80 hour work weeks are the norm.

    - I have about $10k in CC debt that I've picked up over the last four years. I don't spend frivolously, almost everything on the CC's is living expenses, mostly food and gas. If you break down $10k over 48 months it's about $200 a month - so that's a few tanks of gas and a week of groceries that I've need to put on cards. Basically the reason I got into CC debt is because of my $600/mo student loans.

    So in summary I'm a mess and I'm tired of living like this and I really don't see it getting any better, even if I do go find another job because they pay most likely won't be anything great and I'll still be in the same situation. Should I consider filing? Is there any chance my case would be approved? Any other information would be appreciated, thanks!

    #2
    What state are you in?

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      #3
      Connecticut.

      Comment


        #4
        What state do you live in?

        Although 10,000.00 is a lot of debt, it isn't a huge amount to BK over.

        I know I might get a little flack for posting this, but you may actually do better by defaulting on the Private SL, DEPENDING ON YOUR STATES GARNSHMENT LAWS, and I wrote that in bold because it is an important factor to consider given that the bulk of your debt is non-dischargable private SL debt.

        If you are working 60-80 hrs a week, there is virtually no way you can discharge the SL debt (but you already knew that, but just covering my bases) You have the capacity to earn income-thus not passing the 3 prong test to determine dischargibility of SL debt.


        Also, since the bulk of your SL debt is private, consolidation through a program like William Ford is iffy, (I don't know what kind of private loan these are, so a little more clarification on those may help.) Plus by consolidating private loans with Federal ( if it is even possible) will cause you to lose the Federal benefits that come with the Federal loans (deferment/forbearance/forgiveness,etc)



        OK, now what I am about to post is hypothetical.

        Not knowing your state, I don't know the cap on garnishment rates. But if you are in a state with say a 10% garnishment rate, and you defaulted, you would be looking at about a 400/mo savings on SL payments per month.

        And if you stopped making payments on your CC debt, you most likely would begin getting offers to settle, perhaps as low as 20% of the entire debt.

        So for 2000.00-3000.00, you may be able to pay off the 10,000.00 debt.You would most likely be 1099'd for the deficiency and have to pay taxes on it.

        Your SL payments(garnishment) would be based on your states garnishment laws.

        The issues with this "plan" are you would probably need the settlement money paid within 2-3 months of the offer.

        Your credit would take a huge ding (But it would with a BK anyway)

        You will have collection fees added to your Private SL balance because of the default.

        You run the risk of having a judgement on your CR, or risk being sued by a CC company.

        The good news is you could always play the BK card after you try something like this and if it doesn't work as planned, you file CH 7.

        You would want to first talk to an attorney and see if you qualify for a 7.

        And believe me, I am a firm believer in BK and not trying to dissuade you from filing, but 10,000 is really not a lot to BK over, and isince you are so young, if you ever had a major medical event or other issue that required you to file, you wouldn't be able to for 8 years after you filed your first BK.

        It is just something to think about. Talk to a few attorneys to get their feel on your situation.

        It is those damn SL that are the problem and you really have few options because the bulk of them are private.

        DD

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          #5

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            #6
            Thanks for the garnishment info, though I'm not really sure what it means or how to interpret it. How would defaulting on the private SL lower it by so much?

            I've tried everything with the private SL loans, I cannot consolidate them and I have missed several payments and used up two forbearance periods (the maximum) so defaulting is the only thing left that I can do.

            Also, I know $10k isn't a lot to BK over but the issue is that it isn't going to stop any time soon, I'm basically stuck in this cycle until business picks up and I can get a raise - which hopefully will come by the end of 2009.

            Comment


              #7
              The max in your state they can garnish is 25% of your wages, and sometimes there are a few deductions/exemptions you can take. I didn't thoroughly read your states laws on garnishment, but given the 25% rate, if you make 2000.00/mo, the max they can take per month is 500.00, which, unless you can exempt some of that income from garnishment, wouldn't really help you much.

              Do your private loans allow you to defer if you are in school half time?

              That might be one avenue to look at , a possible deferment for going back to school. Half time would be about 6 hours/week in school, but it could save you 600.00/mo in payments if the private loans allow for in school deferments.

              Not sure if they do or not and not sure about whether the classes you take have to be applied towards a degree requirement, but if you took a couple classes at a JR College and could defer based on that, it might be an option, until things get better for your business.

              You would have to do some research yourself to see what all the requirements are for in school defermants, etc.

              Private SL are tricky, and they don't have all the benefits of Federal loans, so I really don't know.

              How much are your monthly payments on your CC debt?

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