Increase in income. Do I have any options outside of bankruptcy?

[derp]

I owe $19,000 in unsecured credit cards to 8 companies. My last credit card payments were made in April of 2010. I still payed my rent, car payment, insurance, ect., this entire time, and lived on cash. I have no assets, and my BK lawyer seemed to think I was a clear cut chapter 7 case, and I paid him a $500 retainer. This was in June of 2010.

My hours at work were cut after this, and I couldn't come up with the remaining $1000 to pay him and file, so I waited. Earlier this year I took a temp-to-hire job making a little bit more than I was making at my last job. It was enough to live comfortably on, without the $650 a month I used to pay in credit cards. I didn't file in this time.

In July 2011, the company I was working for hired me full time, and while I'm under a 6 month probationary period until the end of next January, I'm making great money. Easily enough to pay back my creditors. In fact, if I work enough OT, I could pay off that $19,000 within a year, and still live comfortably. [edit: the amount I owe is over $22,000 with all of their fees attached.]

The problem is, all of my debt seems to have been charged off, and now collection companies own it [edit: it looks like two of the debts were "purchased", one is still open, and the other five accounts are closed.]. I don't get harassed anymore. I was only getting calls from one company before I changed my phone number, and I can't remember the last time I received a settlement offer in the mail. It's been months. My credit score is still good enough to change cell phone carriers, and get a decent phone without a deposit.

So what do I do now? I get the feeling that working with these collection agencies would be like flushing money down the toilet. Is there a medium I could work with, or is finally filing my best option?

Based on the money I made while still a temp, I should still be below my states median to file chapter 7 (the lawyer wants check stubs from March 1 thru August 31, if I'm filing in September, so I would only have 1 big check in there), but that window is quickly closing. Would the money I make after filing, but before my 341 influence the courts opinion?

Don't get me wrong. I'm not trying to run from my obligations here. I wouldn't mind filing chapter 13, or going back to regular CC payments (which I could pay down in no time) for that matter. It just seems like such an immense headache. I talked to my lawyer for the first time since last summer, but didn't go into detail. I just told him things have changed, and I should start over again. I haven't committed to anything.

note: While I haven't bought any big ticket items, I have been blowing my money recently. There are A LOT of transactions to Amazon, shops, restaurants, ect, on my bank statements. How bad is that going to look if I should file chapter 7?

[mountanddo]

Easily enough to pay back my creditors. In fact, if I work enough OT, I could pay off that $19,000 within a year, and still live comfortably. [edit: the amount I owe is over $22,000 with all of their fees attached.]

If you could easily pay off all your debt in a year and still live comfortably why would you NOT do that and opt for a C-13 and be stuck for 3-5 years. Even though the debt has been charged off you could still pay it.

[GIn]

There would be no way I would file BK for only $19k in debt. You've already taken the credit score hit and are on your way to building it back up. With your increased income save up a fund for settlement. Offer to settle with the creditors for pennies on the dollar for those that begin harassing you. For those that don't call wait out the statute of limitations.

[keepsmiling]

^^^^ what they said ^^^
settle those bad boys, and put aside a few bucks to pay the taxes next year
good luck, let us know how it goes!

[moe]

They have these attorneys who will negotiate with the collections agencies for you. My brother in law did that.

I think people here will know more about it.

If you have an increase in income that puts you over median and you don't have a lot of allowable expenses, you may not qualify for 7. I read about this thing called 'totality of circumstances' where they look at your current income and what income you will have in a year.

I assume they wouldn't do that unless they make some people who currently qualify for 7 go in for a 13 because of a change of circumstances.

I found a court case online where the judge did exactly that and it was sort of an interesting read.

Please note: I am a total bankruptcy novice. I just come here to read to figure things out.

But my personal opinion is is that the very best thing for all of us would be to pay down our debt if we had the means to do it. I would call a bankruptcy attorney and see if they can refer you to someone for debt negotiation--or look online.

I agree with the people who are saying you should find some way to get rid of the debt rather than get into the bankruptcy nightmare.

[BKAttyMI]

The problem I see with attempting to settle or pay off these debts (besides any tax consequences), is that once the debts have been sold off, they tend to pass from collection agency to collection agency very quickly. I've had clients come in claiming that they've paid off one agency for the same debt another agency is now suing them for. While you work out a payment plan with one collection agency, the debt might get sold to another agency while you're paying and start the headache all over again.

[mountanddo]

There would be no way I would file BK for only $19k in debt. You've already taken the credit score hit and are on your way to building it back up. With your increased income save up a fund for settlement. Offer to settle with the creditors for pennies on the dollar for those that begin harassing you. For those that don't call wait out the statute of limitations.

Well, I have 20k in CC debt and I have to file C-13 because the other option is wage garnishment and I don't make enough money for them to take 25% of my income. That's just ONE card. I'm sure the others will follow. You say only 19k in debt like its nothing. It took me 7 years to accumulate my debt and a lot of that is because I put some medical bills on my credit cards which was a stupid thing to do. Yes, compared to people that have 160k in CC debt and a house and 2nd mortgage and cars it doesn't seem like a lot but it's just as financially crippling to someone that doesn't make much.

[moe]

The above poster is correct that it depends on income and future resources. A $19 K debt can be paid off quickly by someone making $60,000 in a reasonably affordable city (where rent is not $2000 for a studio apt, etc.) But it cannot be paid off quickly by someone making $20,000 a year.

The original poster says he's making great money so a better strategy than bankruptcy is to pay down the debt ASAP. Just live on rice and beans for a year or whatever it takes.

This only works if you are making 'great money.' Most of us already live on rice and beans, even if we now have OK salaries because virtually my entire take home salary (I am the higher wage earner) goes to the credit cards. So first we were unemployed, then underemployed--and now we are both employed but only living on one salary because of our debt. I suspect this is true for a lot of people here.

The size of the debt is not important in other words, just the surrounding circumstances--but that's not a criticism of anyone.

I guess mentally I am really starting to see debt, income, living expenses and a lot of other things differently since I started this process.

[mountanddo]

The problem I see with attempting to settle or pay off these debts (besides any tax consequences), is that once the debts have been sold off, they tend to pass from collection agency to collection agency very quickly. I've had clients come in claiming that they've paid off one agency for the same debt another agency is now suing them for. While you work out a payment plan with one collection agency, the debt might get sold to another agency while you're paying and start the headache all over again.

You can't prove that you have paid this debt to the other collection agency? Surely there must be some recourse if the collection agency is collecting on a debt that they know they have sold to another agency.

[BKAttyMI]

You can prove it, but the problem is proving that that agency owned the debt at the time you were paying it off. Things get very messy in the debt collection/selling debt world. I've met with many people that have had very rough times with collection companies years after they'd supposedly paid a debt to another collection company.

[TBA]

Here is my suggestion as far as avoiding filing and paying off debt.

They do sell collections very quickly from one company to another. To avoid getting into trouble - DO NOT MAKE PAYMENTS to collection agencies. Make payments to yourself and then pay each collection off in one lump sum. GET DOCUMENTATION.

And NEGOTIATE. You can hire someone with experience to do this for you, but in the end, they cannot do anything that you cannot do yourself. First rule - Dont ever take the first offer. They didnt pay the full amount, and you shouldnt either - (Unless you want to try to negotiate to have the collection removed from your report, or if we are talking $50...). Make an offer much lower than what you have on hand when you offer them a lump sum. Before you even pick up the phone, have a number in mind.

Dont negotiate with the idiot who answers the phone (nothing personal to the people who do this for a living) - they dont have negotiating power. Get the supervisor. And dont ever take no for an answer. If they supervisor says no, get his boss, and so on.

Once an agreement is made, fax them a copy of the check and request for documentation showing it is paid - or however you negotiated. Save that document forever.

Good luck.

[derp]

Thanks for the answers everyone. I've decided to basically not do anything at this point. Since I DID pay an attorney $500 last summer, I'm going to fill out whatever paperwork he gave me, and turn it in, just to see what he recommends.

I'm not sure BK is the answer. I'm starting to think that maybe I'd be blowing my "get out of jail free" card if I filed over $22,000 in credit card debt. What if I lose my job, and wind up with hospital bills in a couple of years? Last resort and all that.

My train of thought right now is to simply get on with my life. If I was still dealing with the original creditors, I would go ahead and try paying them off, but I'm not going to make the effort to contact random collection agencies. It sounds messy.

I'll just live life, and save up. If I start getting harassed again, or someone shows up with a subpena, I'll be prepared.