About to Decide

[deadly99]

Well I'm at that point. I'm young, made the wrong decision and have finally come to the point where it may be time to file. I'm 24, I have what most would consider a well paying job, but yet I still live pay-check to paycheck each month because of a high car payment, high insurance and credit card debts from when I was younger.

I owe about 30K on a car that is worth maybe 19K, I pay almost 700 bucks a month in car payment and the intrest rate is through the roof. Combine that with 300 bucks a month of insurance and it becomes a serious money pit. I also owe about 5K in credit card debts that I have been paying on through debt consolidation but to be honest with that and my monthly car payment I'm not making any real progress.

My credit score is horrible, and I think honestly after a chapter 7 it would only get better not to mention the amount of money I would be saving each month, I'm guessing roughly 1200 bucks a month in savings.

My only concerns at this point are

1.) Transportation to work, once I file I know they will take my car but I have to be able to get back and forth. I don't need anything special. Will anyone finance me? I'm thinking at the very most something around 10K that I can pay off in a year by having a lower car payment but with the amount of cash I will be saving each month just doubling the payments.

Note: I do not want to keep my current car, even with some kind of better monthly payment it's still not worth it.

2.) My current apartment, I just moved in about a month ago. Can they kick me out if I file?

3.) Can I keep a credit card? I have an orchard bank one with a low limit that I would like to keep and continue to use and payy off to rebuild my credit.

4.) Not being able to file, is there an income limit? On paper my salary looks pretty decent but at the end of the month it gets burnt up really quick. I'm also in sales so it's not always on the high end.

About how long does all of this take, and cost?

Thanks for any info in advance

[HHM]

Honestly, I am not sure bankruptcy is right for you, certainly not a chapter 7, it would be somewhat of a waste.

Your overall debt load is very low, you only have $5,000 in unsecured credit card debt, which is very managable.

Certianly the car is a major drain and it sounds like you are too upside down to refinance into another car, but if your credit is bad, this would be hard. (but what they can do is put you into a cheap "new" car (think Toyota Scion xA, Chevy Aveo, etc), and impound your negative equity into the new loan, at least that way you would owe maybe $20,000 instead of $30,000). The reason it has to be new car has to do with the lenders willingness to lend at a higher loan to value plus the dealership can throw various incentives at the deal which they can't with used cars.

Why is your credit score so low, what happened?

You could attempt a chapter 13, whereby you reduce what you owe on the car to the fair market value (i.e. $19,000) and pay that amount off over 36 months, instead of what you owe.

[deadly99]

Honestly, I am not sure bankruptcy is right for you, certainly not a chapter 7, it would be somewhat of a waste.

Your overall debt load is very low, you only have $5,000 in unsecured credit card debt, which is very managable.

Certianly the car is a major drain and it sounds like you are two upside down to refinance into another car, but if your credit is bad, this would be hard. (but what they can do is put you into a cheap "new" car (think Toyota Scion xA, Chevy Aveo, etc), and impound your negative equity into the new loan, at least that way you would owe maybe $20,000 instead of $30,000). The reason it has to be new car has to do with the lenders willingness to lend at a higher loan to value plus the dealership can throw various incentives at the deal which they can't with used cars.

Why is your credit score so low, what happened?

You could attempt a chapter 13, whereby you reduce what you owe on the car to the fair market value (i.e. $19,000) and pay that amount off over 36 months, instead of what you owe.

Yes the car is the major drain, but the CC payments are a problem as well. My credit score at last check was in the low 500s(from my credit report only one negative appers a chraged off account) if that now. I would like to wipe out the car and the CC debt and just start over at this point with the lessons learned and my credit score is so low it can only get better.

I can't refinance the car, and no dealer will take it in as a trade in without trying to kill me even more on intrest and then lowering my payment by a hundred bucks if that while owing 20K on a car that's worth 7K

I'm guessing once the car and the CCs are gone, within a year I will be much better positioned all around, if I continue the way I am now or take one of the dealer offers I'm sure I'm just going to end up back where I started. Like I said while my income may look good on paper, it's a struggle at the end of the month and since I get paid comission sometimes I'm ok, sometimes I'm not.

[HHM]

Fair enough, I certainly understand the bind you are in.

However, here is your other challange, your income to expense ratio. To file a chapter 7, you "living" expenses must equal to or more than your income. Thus, if you eliminate your $300 minimum payments to creditor cards and as a result would have $300 per month in disposable income, you will not qualify for a chapter 7.

You need to sit down and figure out a monthly budget, i.e. what you spend on living expenses, i.e. rent, insurarnce, groceries, utilities, etc etc, then compare that number to your income, if your income is higher, by more than $100 per month, you will probably not qualify for a Chapter 7.

I would suggest you go meet with a BK lawyer, most initial consultations are free, to get a sense of what your options are.

[deadly99]

Fair enough, I certainly understand the bind you are in.

However, here is your other challange, your income to expense ratio. To file a chapter 7, you "living" expenses must equal to or more than your income. Thus, if you eliminate your $300 minimum payments to creditor cards and as a result would have $300 per month in disposable income, you will not qualify for a chapter 7.

You need to sit down and figure out a monthly budget, i.e. what you spend on living expenses, i.e. rent, insurarnce, groceries, utilities, etc etc, then compare that number to your income, if your income is higher, by more than $100 per month, you will probably not qualify for a Chapter 7.

I would suggest you go meet with a BK lawyer, most initial consultations are free, to get a sense of what your options are.

Thanks for the info, but how would I work in my wages. I make a base wage ($11.00 an hour) and then commission, commission is not set amount. I could have a bad month and make no commission or have a really good month and make a couple of extra thousand. Hence if I have a really crappy month or two I couldn't even afford to pay for the car let alone rent, bills, etc

Guess I will search and give a BK laywer a call.

[HHM]

Commissions are tricky, typically you look at your 3 and 6 month rolling averages. Is your pay base + commission, or is the base merely a guarantee.

By you post, it sounds like you make base + commission, so your base gross pay is $1,848.00. Lets assume your total commissions for the last six months was $8,000, then your rolling 6 month average monthly gross earnings is $3,181.33.

[deadly99]

Commissions are tricky, typically you look at your 3 and 6 month rolling averages. Is your pay base + commission, or is the base merely a guarantee.

By you post, it sounds like you make base + commission, so your base gross pay is $1,848.00. Lets assume your total commissions for the last six months was $8,000, then your rolling 6 month average monthly gross earnings is $3,181.33.

Gotcha, I'll check out the chapter 7 route first if this does not work then I'll have to find some other way to take care of it. I have to rid myself of the car though.

So if not chapter 7, I guess chapter 13 on just the car or hope I can find some dealer with some crazy rebates to unbury me

I had a good contract that was supposed to last at least 2 years that would have maybe made all of this affordable and it has worked ok for the last 6 months or so, I would have at least 200 bucks or a bit less left over each month for gas, food etc. But the contract is going to end earlier, which is going to cause my income to plummet

[deadly99]

Talked to a lawyer over the phone today, as you said it looks like my income maybe too high for chapter 7. Which really sucks, because it may look good on paper but each month I find myself scrambling to keep up.

Is there a way to just do the car? I would gladly be able to pay off my CC debts in a couple of month if it wasn't almost for this $1000 a month I pay for the "privelage" of driving my car.

[HHM]

About all I can suggest is a Voluntary Repo, simply give them the car back. The problem, of course, is that you will be stuck with a deficiency balance, i.e. the difference between the value of the car and what you owe. The finance company will sell the car at auction, and get whatever they get for it. The concern for you is how little they sell it for, but if they sell it for too little, then you can take them to court to dispute the amount owed.

Thus, instead of owing $30,000, you might end up owing $9,000-$12,000. Note, they will still have to sue you to garnish your wages. And, you could always file BK in the future to get rid of the Deficiency balance.

Its not a great solution, but its something. Unfortunately, because your main debt problem is a secured debt, there just aren't that many options for dealing with it, Chapter 7 doesn't really help (except that if you surrender the car in the BK, the deficiency balance is discharged). Chapter 13 is plausible but you probably won't see a too huge a reduction in the payment.