Bankruptcy Or Cc Debt Consolidation?

GMAC_CA

LoanSafe Member
Dec 17, 2009
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I received some GREAT advice on this forum years ago about my HELOC (which reminds me, I should update that thread) and the advice I got from members like TomEason and yomann was exactly what happened, so THANK YOU to this forum and these members!!!

Now I'm back with how to handle my unsecured debt (mostly credit card debt)...

As of today, it totals just over $130,000. Most of this is debt (almost $105,000) is from supporting my business over the years (i.e., equipment, etc.) but, at the end of the day, I'm on the hook for all of it.

I think the 3 options I have to get out of debt is...
1. Bankruptcy
2. Consolidation
3. Settlement

I'm leaning more on bankruptcy unless there is something I'm not thinking about. So I want to know what I can expect if I stop paying the minimum payments? I'm assuming the big credit card companies may not sue me but if they sell the debt to a collection agency, I'm then assuming they will sue me. If they sue, can I then file for bankruptcy? I was thinking of waiting to see what they do first.

If I file for bankruptcy, I guess the only thing I would be concerned about is losing my wife's wedding ring (which is insured for over $20k). Maybe our primary car (2010 Camry), which I just don't want to worry about having it repossessed during this process, especially since I only owe less than $700 on it anyway.

Also, can I file for bankruptcy and exclude my wife? She only has 2 accounts in her name (which we could pay off) and all the accounts are mine, with me listed as the primary card holder, although my wife is listed as an authorized user.

I think bankruptcy is probably my reasonable option since I have almost 20 different accounts total (mine and my company's) that I would have to get to all cooperate with one another and come up with a consolidation or settlement option. Or should I consider other options?

Thanks!

P.S. Still struggling since 2008!
 

Moe Bedard

Call 1-800-779-4547
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Hello and welcome back to the LoanSafe forum. I'm glad the members you mentioned were able to assist you with your mortgage.

Planning to default on debt is like planning anything in life. You want to make sure that you cover all the bases so things go somewhat smoothly.

When you have as much debt as you do and do not have the income to pay it back, then bankruptcy is almost always the best option to wipe out your debts and start fresh again. A Chapter 13 bankruptcy is essentially a prepayment plan and requires that you make enough income to pay back your creditors over a 5 year period. In my experience, chapter 13 is not the ideal way to go bankrupt because you have to pay them back anyways and make monthly payments. This often will tap you and your finances over a 5 year period and may cause lots of unneeded stress.

The best way would be a chapter 7 bankruptcy which will essentially wipe out all debt and you won't have to make monthly payments. You can then reestablish credit right away if needed be through prepaid cards and other methods.

In regards to the rings and any other personal property of great value, you have to be careful. The cars should be fine because you need them and they are not luxury and or collectors cars. The ring may be a problem because of its value. Many states allow you to keep wedding and engagement rings, no matter their value and other states like California put a dollar limit on your wedding ring.

Section 704.040 of the California Code of Civil Procedure exempts jewelry, heirlooms and works of art to the extent their aggregate equity does not exceeds $7,175. The exemption can be used to exempt wedding rings.

As an authorized user on your credit accounts, she is not part of the credit contract so she will not be affected in any way by you claiming bankruptcy. Just to be safe, I would remove her as a user before you file.
 

despritfreya

LoanSafe Member
Sep 8, 2011
369
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Your inquiry is too complex for this forum as it relates to bankruptcy.

1. If you live in a community property state (you don't mention where you live) your wife is 100% responsible for those credit cards.

2. If you still operate a business, filing a Chapter 7 may put that business at risk depending upon how it is set up, what assets it has, what debts it has etc.

3. Chapter 13 does not require you to pay back 100% of your creditors unless you can afford to or have non exempt assets you wish to keep that are valued at more than what you owe.

4. Your "income" in the 6 month window prior to filing bk determines what chapter you "qualify" for regardless of what assets you have.

You need to sit down with a qualified bk attny. Most give free initial consultations.

Des.
 
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