Debt Resolution Program Vs. Bankruptcy

[Shug1967]

I have no one I can talk to about this to who can offer me any advice.

My husband and I have had a really rough past few years. Four years ago he was working for his dad and his dad developed a gambling problem, and then business got slow. My husband stopped getting pay checks weekly and we had to use credit cards to make ends meet. After two years of that, the business finally went into the ground. We took out a home equity loan and bought the equipment and went into business for ourselves. Business was slow at first so we relied on the credit cards again.

Now in present day we have $32,000 worth of credit card debt from 10 different cards. All of the credit cards are in my husbands name and were established prior to our marriage. I am not an arthorized user on any of them - although I did make purchases with them.

The only other debt we have is the home equity loan, our home loan and a business loan. We do own 4 different vehicles, all 1999 and older, with probably a total value of $20,000.

Our credit cards are all near 30% interest rate and we've now fallen over a month behind on 4 of them. We're paying around $1000 a month in payments (considering there are no late fees) just to make the minimum and it's mostly being applied as interest so we're not eliminating any debt. Basically - there is no hope of ever getting out of this hole.

We have two options - bankruptcy and a debt resolution program. I contacted Care One Credit and gave them all of the information except the approval to pull his credit. They are suppose to call back tomorrow night for that and will then email me the documents to look over.

Initially I thought that was the better solution for us, would be cheaper then bankruptcy and would allow us to keep our assets. However, after reading their forum, I have discovered that not all credit companies will accept their plan and we can expect for them to sue my husband and have his wages garnished.

Which in all honesty I'm not too worried about. BUT when you get sued then the lawyers who are representing you through the Debt Resolution Program will require a higher fee, thus raising our monthly payment. And I've read some people will end up having to file bankruptcy anyways.

So I'm asking several questions - has anyone used a Debt Resolution Program? If so, did you have success with it or not? If you were in my shoes, would you file bankruptcy or would you go with the DRP? I know what the benefits and disadvantages of the DRP are - but what are each of bankruptcy? What type of bankruptcy are we more suited for and how would it affect us?

By the way, we live in North Carolina. You advice is much needed and greatly appreciated.

[jp2861]

The first thing to consider is that anyone dealing with DRP's are salesmen. They're in it to make a hefty fee from you and they don't assume any risk. So, beware of what they tell you. You need to do alot of research before going that route.

Lawyers are in it to make money too. But, not nearly as much as the rip off DRP's. And, when you're BK is finished 5 or 6 months down the road, you're finished. Done, end of story. Now you start cleaning and rebuilding your credit.

The DRP's are not going to have much finished in 5 or 6 months. At best, you'll probably be at the point of being sued by your creditors because the DRP's dragged it out to that point.

Just my opinion, but I see way too many advantages to BK rather than the DRP's. Talk to a few lawyers and they'll advise you on what assets you can protect.

[Shug1967]

Would you agree that bankruptcy is just as bad as going the DRP route? That's what I'm starting to think.

[HeatherB]

After knowing what I know, I'd at least have my husband file some sort of bk. I am not familiar with chapter 11 or 12 (I think those are business ones).

The few Debt relief programs I have heard of, not many people make it threw them. (and I've *heard* that your credit cards are likely to keep posting as lates anyway - they just don't add such high interest). I think that even if a DRP does help you pay off your debt, it still can possibly tank your credit score.

That's just me thinking, though. Someone else may have a totally different look at it.

[rrockinggramma]

I will just throw out my 2 cents. I would just file the BK and get it over with. I have been hanging around the BK site for several years. (chapter 13) and I have seen over and over and over again stories from individuals who went the DP route first and then ended up filing BK anyway. The DP works by taking your money and holding it until they have enough built up to settle with your creditors. However in the mean time you will still get calls and threats and could even be sued. Lates will continue to report on your credit and your score will sink into the muck. Now BK will definitely kill your score, but you will be debt free (except for the secured's etc). A DP program could take a long time to complete and your fresh start will be delayed. In addition, a long time ago I went to a place called CCCS. They worked out a plan with my creditors etc. However on my credit report they all reported it as a wage earner plan. Even though it wasn't an actual BK, it still messed with my credit score big time and I still ended up filing BK. Go BK and get it over with.

[Lindsay]

In one of the books I read on bankruptcy, it says that being in credit counseling or debt reduction can hurt your credit worse than bankruptcy. A major part of the FICO score is debt to credit ratio and a bankruptcy will wipe out the balances.

[leftyf]

One of my best friends went 7 about 4 years ago after trying a DRP for awhile...his last words as he told me he was going to file bk were "Those things a are a big scam and a major ripoff." I've found the opinions on this board to be about the same. Even Dave Ramsey doesn't promote them...

[jp2861]

Would you agree that bankruptcy is just as bad as going the DRP route? That's what I'm starting to think.

No, I wouldn't agree to that, and here's why. I look at this as plan of recovery. If I look two years down the road I'm in much better shape by filing for BK relief. 1) During that time my quality of life drastically improves due to being relieved of the unsecured debt responsibility. 2) What I don't pay in unsecured debt versus making payments on a DRP, can be invested, or part of it anyway. 3) By the time two years passes, I will be well on my way to having my credit cleaned up and well into the rebuilding stage.

How long will it be before you start rebuilding your financial situation if you opt for the DRP? 5 years? 10 years? Then a few more after that to get your credit to start to shape up. Like I said, you need to do alot of research on these DRP's.

Either way will dork up your credit. But which one will provide the quickest way to recovery? Only you can answer that. Do your due diligence and research your options. Come back here and ask questions. Then decide which is best for YOU. We all have different situations and goals.

[poorme]

Go BK - you'll be glad you did.

One of the selling points with a drp is how they brandish the 'dreaded bankruptcy" banner. Well, lots of folks here - even bankers and financial advisors - will tell you that bk no longer carries the stigma it did years ago. It still has credit implications, but those are able to be overcome in as little as 6 mos to a year after your discharge. In fact, many pros are looking at bk as a more intelligent decision when tough debt situations exist. I mean, come on - take advantage of your rights and laws to help yourself and get your life back on track. Good Luck.

[Shug1967]

A few general bankruptcy questions I have....

Can you file bankruptcy on only some debts - such as just the credit card debt, but not on our home loan and our home equity loan? We have to have a house, and if we can make those payments.

When you file bankruptcy, exactly what happens to the unsecured credit card debt - will we have to pay 100% back?

How do they determine how much you have to pay back through bankruptcy? Is it a % of your income or a % of your debt

What "pre bankruptcy" advice do you recommend - my husband thinks we need to put his two trucks in my name or a trusted friends name?

Does it matter that we took a home equity loan out about 20 months ago? We used all the money to buy the business equipment so we don't have any left - we're paying it off.

When is the best time to file? Immediately, or should be quit paying for a few months and save that money?

[Shug1967]

One other questions - am I correct in thinking he can file but I don't have to?

[jp2861]

What "pre bankruptcy" advice do you recommend

Call some local lawyers that specialize in Bankruptcy Law and schedule free consultations. Take all the questions you have posted here with you.

[mcszele]

As someone who's gone the CareOne route, let me tell you that it is complete crap. When I did the CareOne plan they only lowered my payments by $300.00 a month, and that was because of a mistake with one of my creditors that had the wrong account number. After adding that one it was only $200.00 savings. Then the rejected proposal offers started coming in. The first one was mild, only a $20.00 difference. I OK'd that one, and then another one a week later. That one was for $85.00. Then three more on the same day a week after that totaling $237.00. Then a letter three days after that saying one had rejected it completely because the account was supposed to be an introductory rate. I have had that account for over 10 years, no introductory rates there. All along the creditors are calling, and I tell them exactly what CareOne tells you to tell them. Have them call CareOne. So I give them the number and that gets one off my back. One out of 18. The other ones have different answers, one tells me that they rejected the proposal but I never got a letter stating that, one tells me that they know about the CareOne program but that doesn't mean that they are going to stop calling me. They say that I need to make up the difference between the CareOne payment and what the bill says that I owe, or they are going to keep hitting me with late payments. I tell CareOne and they say this is OK the benefits don't kick in for 90 days, and that this will stop. It didn't. And of course my favorite is that CareOne tells you to pay your bills as normal as possible while your transitioning into the program, so they expect you to pay them and your regular bills in the same month. Lets see, if I had that kind of money why would I need them? So now 4 months later CareOne is gone and I'm interviewing lawyers to declare bankruptcy, and saving up as much as possible to pay for the lawyer. So basically CareOne took $55.00 a month, trashed my credit, and made it so that I'm so far behind that I'll never be able to catch up on my own now. And as a parting shot from CareOne, when I canceled the program they sent me a letter stating that they got my cancellation request and:

You will continue to have access to Member Benefit Services including Legal Access Plans and all of
the other savings and discount opportunities. Your account will continue to be charged just $5 for this
service.

All of which is complete crap and I never used anyway. And it has been fun getting them to stop this small little fee.

I'm not saying that all DMP are crap but this particular one just made things much worse for me. So save yourself the 4 months of agony and just file now, I wish that I had.

Michael

[Shug1967]

I discussed everything with my husband and he's really not wanting to go the bankruptcy route. I think it's just the word "bankruptcy" that is scary to him. He wants to avoid it if at all possible.

My thoughts are we're probably going to end up getting sued anyways - with 10 cards (through 6 different credit card companies) it's not likely their all going to accept our settlement offer or work with us. For example, I have already learned that Discover and Bank of American won't work with them like the others. BOA will accept a settlement, but not payments. So you have to build up enough to make the settlement, and in the mean time they're suing you. And at that point we're going to have to file bankruptcy, and we've wasted time and money with the DRP. Reading others stories or lack of success with the DRP (like mcszele's) hasn't helped matters.

I'm trying to do some basic research to find out exactly how bankruptcy works (which was why I asked the simple questions) so I can make sure it's something we want to pursue further. If it's something we won't be able to do then there is no sense in me wasting the lawyers time when I could have found out some of the answers myself. Furthermore I need some basic information to give my husband so he will even consider it.

Basically if the bankruptcy would mean we'd have to declare bankruptcy on all our debts then I don't want to do it. I would prefer that our mortage companies (home payment & home equity) not even know we filed it if at all possible. Just because the HE is though our personal bank and I would feel very embarrassed to continue doing business with them. The business we own is actually in my name only, and there isn't much debt it's name. So I shouldn't have a problem securing credit if need be, but if they know my husband filed bankruptcy then they might not want to work with me.

[Shug1967]

"Call some local lawyers that specialize in Bankruptcy Law and schedule free consultations. Take all the questions you have posted here with you."

I thought this board was where I could get some of the questions answered.....I don't want to be completely clueless if I do decide to go to an attorney.