Credit card crisis help!

[Titan]

Hi everyone, I haven't been on the forums much since AT is usually a work-related habit, and I was laid off in February, and am still looking for work. I am a software engineer, and while I have had many interviews, no solid work yet. We all know the economy sucks here and my situation is reaching a tipping point and I need to evaluate some unpleasant options which will undoubtedly ruin my credit report, but I think I can avoid bankruptcy.

My problem is that I needed my full time job to pay off massive amounts of credit card debt that I accrued a few years back while living with a vampiric family member. Yes, I know this was stupid, I never ran interest on my cards for years before then which is why my limits got so high. I have since cut out the bad family member from my life. I am now considering not paying the debt, since CCs are unsecured and they can't come after me. I don't want to get into my personal situation deeply here, so I'm not looking to be judged personally. I have paid a ton in interest to these banks, and yes I agreed to it, but the simple reality is coming down to the fact that I cannot pay them now.

I genuinely value the advice of many level-headed ATers so if someone has some reasonable guidance I could use it, because I have always been the guy who pays his bills and never dealt with creditors, or sought professional help with anything like this. Feel free to PM me if you feel more comfortable with that, I expect this topic to get controversial.

My main income is Unemployment Insurance (UI) and I Maxed out at about 12 bucks an hour equivalent. This will run out in August, I doubt they will extend it, since the govt is broke. Since I have been laid off, this has been enough to cover my Rent and minimum payments on CCs, with nothing left. I have been buying gas and food on my CC, using up available credit, and it is going fast.

I am confident that I can find a local job making 10-12 bucks an hour when UI benefits end, but this way of living is unsustainable. I need an engineer's salary again to be able to get by. So I need some help planning out this worst-case scenario.

I have about 25k in debt. 11k on a citi card. 10k on a BoA card, and about 3k on a discover card. I also have a unsecured personal loan with Citizen's bank that started at 10k and is down to 6k, I used it soley to consolidate some credit cards last year. I was not prepared with savings when I was laid off because I was paying down debts aggressively and had a plan to be done in 2 years. So I have already paid a ton of interest here.

1) My first question: since CC debt is unsecured, I can simply not pay it and my cards will be shut off, right? I know they will pull every tactic to try and get me to pay it, and I will have to deal with creditors, they have no legal recourse as far as I know. I live in VT which has some decent laws against creditors in my case. I believe the trick is I need to not contact the creditor at all and after a period of like 2 years, it is done. My credit report is trashed, but no one can garnish my wages, and I haven't filed for bankruptcy. Can someone confirm these thoughts and/or elaborate on them?

2) Is there a good, ideally non-profit debt consolidation company that can take care of this fully or partially? It would be nice to take some of the stress off by having a lawyer deal with all of the companies.

3) Are there any good tips or tricks if I plan to not pay my bills? Can I have them remove my phone number associate with the account so they don't call me, for example? Yes I know what I have to do is shitty, but I want to feel confident in my decision.

I am an all or nothing type of guy so I am tempted to drop all of the cards and loan, but the more difficult and better path might be to drop the two big ones. I might keep the discover and pay it off so I can still build credit. Or I could open a checking acct with citizens and get a small (like 500 bucks) cc for monthly expenses that I always pay off. I hate not having a CC, it is essential for doing business online. So I might just drop the BoA, and Citi, and maybe the Discover. I have been a member of all these cards for 10 years, and I just called all of them and no one can extend my limits, which I am about to reach.

Clearly I could use any advice because I am not used to this mindset or environment. If anyone would like to talk to me, PM me first. I can do alot better in a personal conversation.

Judge me if you like, but I am not going to respond to personal flames. My life sucks enough already. My shame is my business.

Cliffs:
Unemployed
In CC debt of $25k+ and can't pay it
need tips on becoming a deadbeat, and handling creditors
I think I can avoid bankruptcy but need some expert advice

 

[shiner]

Nvm

 

[Saga]

Bankruptcy really seems like your only option.

 

[spidey07]

Honestly, and I am being serious...you are a perfect candidate for Bankruptcy. It's probably your best option. Your credit will stink for a few years but you'll be fine afterwards.

 

[darkxshade]

Honestly, and I am being serious...you are a perfect candidate for Bankruptcy. It's probably your best option. Your credit will stink for a few years but you'll be fine afterwards.

Quick... buy a house before you file.

 

[Titan]

Honestly, and I am being serious...you are a perfect candidate for Bankruptcy. It's probably your best option. Your credit will stink for a few years but you'll be fine afterwards.

I am listening, and would like to know why people think this, if you could elaborate. Might be ok, except I have to check "yes" on any form that asks me if I have ever filed for bankruptcy. And I would like to rebuild my credit as fast as possible with at least damage.

Aren't there two different kinds of bankrputcy, which would apply in my case?

 

[Mike Gayner]

I always laugh when I see people in credit card strife who are still using the cards.

 

[darkxshade]

Aren't there two different kinds of bankrputcy, which would apply in my case?

The wheel of fortune one

 

[chusteczka]

I think you have done great by realizing the influence another persons lifestyle can have on your own, and ending that problem. Now comes the cleanup time. It is always a bad idea to use credit to pay for reoccurring payments; such as food and rent.

An educated engineer can always find a job, no matter the area of expertise. Use your education to your advantage and get back to work. That is assuming you have an engineering education and are not abusing the label of a software engineer.

Regarding the credit situation. I would explore two routes:

• bankruptcy
• talking with your creditors.

Edit:
You could also return to school or study towards certifications that will increase your marketability.

 

[spidey07]

I am listening, and would like to know why people think this, if you could elaborate. Might be ok, except I have to check "yes" on any form that asks me if I have ever filed for bankruptcy. And I would like to rebuild my credit as fast as possible with at least damage.

Aren't there two different kinds of bankrputcy, which would apply in my case?

Because on your income there is no way to even make a dent in the debt and it's only going to get bigger. Bankruptcy would wipe all the debt away and let you start over. For your scenario it's a few years of tough credit rating compared to possibly more years of raking up interest/debt. You'll take a quick and painful hit, but it's better than drawing the pain out over a long time.

With your income and that amount of debt you will easily be able to prove you can't pay it off. Also your UI shouldn't run out that quickly so make sure you talk to your state.

I am no means an expert at bankruptcy but had a very close friend do it 5 years ago. He said it was the best thing he ever did and now has his own condo.

 

[Kyle]

I dont know...I have a feeling if you just stopped paying, the companies wouldn't just forget about it after a couple years- I think they'd keep after you...don't know this for sure, but I bet they could find info about you from your credit report etc, so just changing your phone number wouldn't be enough. Not to mention the balances would just baloon w/ fees and interest...
But again, I really don't know.

 

[PokerGuy]

Regarding your first question, you are very wrong in terms of what they can or can not do. Yes, it's unsecured debt, but that doesn't prevent them from suing you for the amount they are owed, plus interest and fees. The "unsecured" portion just means the debt is not "secured" by a specific asset like a car or house. Nothing else. You'll either have to fight it in court (and lose), or face a default judgment. If you have judgments against you, they don't just magically disappear after two years, they can go after you in all sorts of ways, depending on the regs in your state, including garnishments and the like. After a few years, things roll off your credit report, and there's usually a statute of limitations in play regarding how long they can wait before going after you, but once they have a judgment the SOL is no longer in play that way.

In your situation, bankruptcy seems like the more logical option. You don't have major assets to lose, you get a fresh start and you begin anew. You could easily explain it away in the future: you were laid off for a long time and ended up too deep in the hole.

 

[intogamer]

www.creditboards.com

Declare bankruptcy and start establishing credit using secured credit cards?

 

[geecee]

Regarding the credit situation. I would explore two routes:

• bankruptcy
• talking with your creditors.

Definitely talk with the banks/CCs that you owe money to, before going the bankruptcy route. It never hurts and you'll be surprised sometimes at what they will work out with you.

EDIT: No idea if this is true but here's a link -
http://www.creditcards.com/credit-card-news/what-to-say-when-you-cant-pay-1267.php

 

[Slapstick]

I have to agree, bankruptcy is your best option. Honestly find a good bankruptcy attorney and let him explain it to you but you'd be surprised at how little it actually hurts your credit rating versus not paying your credit card debt.

 

[kami333]

I would definitely check creditboards.com before you do anything.

Also www.faircredit.org is a reputable organization that can help with credit management (not sure if they do consolidation/negotiations)

 

[ElFenix]

I am listening, and would like to know why people think this, if you could elaborate. Might be ok, except I have to check "yes" on any form that asks me if I have ever filed for bankruptcy. And I would like to rebuild my credit as fast as possible with at least damage.

Aren't there two different kinds of bankrputcy, which would apply in my case?

***THIS IS FRIENDLY ADVICE AND DOES NOT CONSTITUTE A LAWYER-CLIENT RELATIONSHIP IN ANY WAY, SHAPE, OR FORM***

for individuals the usual types of bankruptcy are chapter 7 and 13. chapter 7 eliminates scheduled unsecured debt as of the date of filing, with certain exceptions. depending on your state, various forms of property may be exempt from being taken by the bankruptcy trustee to pay the unsecured creditors. exemptions range from very generous (texas, where the usual chapter 7 debtor can keep practically everything if they aren't behind on their mortgage), to minimal (delaware, which iirc has $5,000 exemptions, so you elect to take the federal exemptions, which aren't very good).

chapter 13 allows you to keep all your stuff (good if your state has crappy exemptions), but for the next 5 years you make payments toward the bankruptcy. bad thing about chapter 13 is if you get 3 years in but suddenly find yourself unable to make payments, and get converted to chapter 7, you've basically wasted the 3 years of payments vs. having filed 7 to begin with.

back in 2005 the banks managed to convince congress to change the bankruptcy law to include something called the means test. essentially, the means test determines whether you have low enough income to qualify to go straight to chapter 7. if you're under the median income for your state and family size, you can go immediately to 7. if not, you continue filling out the means test. if your expenses for necessaries are high enough (child care, medical expenses, mortgage, that sort of thing) you may also go immediately to 7. otherwise, go to 13.

it may even then be possible that a chapter 13 plan can't be written for you, and iirc you could then be converted into a 7 (haven't encountered that situation yet so i'm not sure).

anyway, i think bankruptcy is losing it's stigma.

***THE FOREGOING HAS BEEN FRIENDLY INFORMATION AND DOES NOT CONSTITUTE AN ATTORNEY-CLIENT RELATIONSHIP BETWEEN YOU AND I. PLEASE CONSULT A LAWYER IN YOUR JURISDICTION BEFORE TAKING ANY LEGAL ACTION***

 

[Juddog]

My personal advice is to take the lower paying job and then take another part time job on the side. For example a weekend phone job. Many of the callcenters are needing people to work on the weekend.

Yeah it totally sucks but you'll be making enough money to not only get by but to start paying off the cards as well. I worked two jobs for about 3 months and the money from the second job didn't have healthcare costs etc. taken out so in a way seemed more direct. It sucked to work 7 days a week though, very draining, but it was worth it to me versus the alternatives (bankruptcy).

 

[alkemyst]

Because on your income there is no way to even make a dent in the debt and it's only going to get bigger. Bankruptcy would wipe all the debt away and let you start over. For your scenario it's a few years of tough credit rating compared to possibly more years of raking up interest/debt. You'll take a quick and painful hit, but it's better than drawing the pain out over a long time.

With your income and that amount of debt you will easily be able to prove you can't pay it off. Also your UI shouldn't run out that quickly so make sure you talk to your state.

I am no means an expert at bankruptcy but had a very close friend do it 5 years ago. He said it was the best thing he ever did and now has his own condo.

5 years ago vs laws now are very different.

The OP needs to see an LOCAL attorney since laws change based on state.

Chances of total bankruptcy are still today, unless you have business debt then it's pretty easy which is sad.

 

[AlienCraft]

Don't be afraid to record any phone conversations you may have. If they advise you that they might be recording, you may not have to disclose you are recording.

Keeping records (account / file numbers ) straight as accounts go through various collection entities is crucial.
I had a company from my past (2005) call inquiring when I was going to pay.
I pulled up my Accounts Paid off worksheet and whipped the old Fair Debt Collections Act speech on him and as he said"Oh yes, PIF, paid in full , Jan 2007", he hung up.
Another call by them will result in me filing in small claims to pick up my $1,000.00 payment for violating said FDCA.
Know YOUR rights. Act on them. Otherwise they are meaningless.

 

[chusteczka]

From my observations, those people who try to hide from debt in a manner similar to your description of the action you are considering, these people end up hiding for the rest of their life. They never regain a position in society and completely rely on others for living space.

Those people who go through bankruptcy are able to recover and regain their lives anywhere from 3-8 years after their bankruptcy.

You need to be proactive about this situation. Do not run or hide from it since it will then haunt you for the rest of your life.

Talk to your creditors openly and tell them the exact situation you described to us. If that does not help, then consider legal bankruptcy.

Creditors do not want to lose their investment and are often willing to work things out with you in terms of lower payments or decreasing the total amount owed.

A creditor's alternative is to sell your debt to a collection agency for a small percentage of the total amount owned. They will do better by fixing things with you than by selling your debt.

 

[alkemyst]

You definitely want to be careful what you say. If they slap a judgement against you first you may not be able to bring it into bankruptcy.

Saying things like "How can I become a deadbeat?" sure won't win you favor with the judge or trustee. Keep in mind in a total bankruptcy they will take anything of value (PC, home theater, TV, etc) to sell for whatever they can. All states are different, but you are going to not be able to rack up $25k in debt then walk away and keep other things you may have (whether or not they are part of the debt).

 

[JS80]

http://www.fatwallet.com/forums/finance/

 

[coloumb]

Talk to a bankruptcy lawyer - see what your options are. He/she will look at your financial situation and provide you with advice on what to do pending you can file bankruptcy. Chapter 7 can wipe away all/most of your debt while Ch13 is a court ordered repayment plan [and you may be able to negotiate a lower balance repayment]. Since you are unemployed - Ch7 would be the advisable option.

FYI about a few things - if you recently purchased any high dollar luxury items they can request you return it to wherever you purchased it from. If you have anything that's of value [land, house, etc] - they can request it be used to pay back your debt.

Not paying the debt does not mean it's gone "forever" - it's still there and they can take you to court.

If you do file Chapter 7/13 - KEEP ALL OF THE PAPERWORK *forever*. Some creditors have the balls to try and get their money years later assuming you'll throw away the paperwork.

I filed Ch7 about 20 years ago - it sucked for about 7 years because my credit was basically wrecked. But as soon as the ch7 was removed from my credit reports - I suddenly had AAA credit rating.

 

[quakefiend420]

spamming thread necro

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