Conslidation vs Bankruptcy

[Matthew62]

The divorce has just become final and we are working on clearing up the financial mess we are in.

Does anyone have any links that I can look at that would pinpoint the merits of consolidations of loans vs a Ch13 or Ch7?

<Matt>

[Jade]

The divorce has just become final and we are working on clearing up the financial mess we are in.

Does anyone have any links that I can look at that would pinpoint the merits of consolidations of loans vs a Ch13 or Ch7?

<Matt>

I don't have any links, but consolidation isn't going to destroy your credit for more than 7 years.

Not to mention that the current idiot in the White House has made it next to impossible to declare bankrupcy. 

[anniewalker]

Thankfully, for those of us lucky enough to be able to do simple math and know what we make and what we can spend - it is very difficult to file bankruptcy without the proper grounds.  This country has a NEGATIVE savings rate!  That means that on average, Americans spend more than they make!  And then, they declare bankruptcy so that the burden of paying their debt can be distributed to people who don't have nor want their problem!

You can get some great information here: http://www.uscourts.gov/bankruptcycourts/bankruptcybasics/chapter7.html

Please look over all of the options before you decide which route to take.  As a (former) licensed personal financial planner (my license lapsed 4 years ago and I no longer in the field), I can tell you that MANY people have chose to file bankruptcy and regretted it a short time after.  It stays on your credit for 10 years.  Bankruptcy can affect an existing security clearance, and can keep you from obtaining one.  Some employers check your credit and won't hire people with low credit scores.  Many landlords check credit and a bankruptcy can keep you from renting a home.  Obtaining a mortgage will be difficult in the wake of a bankruptcy.  Here is an article from a finance site The Motley Fool on Bankruptcy:
 http://www.fool.com/investing/dividends-income/2006/05/25/why-you-shouldnt-file-for-bankruptcy.aspx

Credit Counselling can be good and can be bad.  Suze Orman has a great article on it here: http://biz.yahoo.com/pfg/e32credit/art031.html

Beware of the debt consolidation:
http://www.bankrate.com/brm/news/debt/debtcreditguide/consol-dangers1.asp

All of the solutions are going to have UP and DOWN sides.  Some are better than others.  A good financial planner might be the best money you can spend in straightening out your financial mess.  The #1 thing it will take is time.

Best of luck & God bless!

[Dallas]

...
Not to mention that the current idiot in the White House has made it next to impossible to declare bankrupcy. 

Last time I checked the Legislative Branch passed laws, not the Executive Branch.

Dallas

[Jade]

...
Not to mention that the current idiot in the White House has made it next to impossible to declare bankrupcy. 

Last time I checked the Legislative Branch passed laws, not the Executive Branch.

Dallas

My mistake.  I should have said the following:

The Republicans (who controlled the legislative branch at the time) supported Bush's (a Republican) bill to make it next to impossible to file for bankrupcy.  So ALL of the republicans who voted for this (and the Democrats, as well) are to blame.  But since it was Bush's idea and Bush who pushed it, he gets most of the blame.

[m_t]

On the other hand... why should creditors pay the price for those who live beyind their means?

[livealittle]

On the other hand... why should creditors pay the price for those who live beyind their means?

I've read a bunch of stuff on that new bankruptcy law and the people it really really hurt are those with catastrophic medical bills their insurance didn't cover and now they can't declare bankruptcy....

I totally agree with the live beyond their means statement you made - I also think there shoudl be something for people in the above situation.

[Jade]

On the other hand... why should creditors pay the price for those who live beyind their means?

I can think of some reasons why a person would need to declare bankrupcy.

Unemployment
Divorce (especially if the ncp is a deadbeat and doesn't pay child support)
Catastrophic medical reasons.

Do you really think this law is going to stop creditors from paying?  Just where are they going to get the money from a person who has no money? 

[Dallas]

On the other hand... why should creditors pay the price for those who live beyind their means?

I can think of some reasons why a person would need to declare bankrupcy.

Unemployment
Divorce (especially if the ncp is a deadbeat and doesn't pay child support)
Catastrophic medical reasons.

Do you really think this law is going to stop creditors from paying?  Just where are they going to get the money from a person who has no money? 

If I understand your post, it doesn't matter whether or not a person files for bankruptcy because you can't get blood from a turnip.

Dallas

[anniewalker]

First, the new laws do not prohibit anyone from filing bankruptcy.  They make it harder to claim Chapter 7 which is where all debt is dissolved.

Second, the laws are there to make sure that people don't run up huge debt, file bankruptcy, run up huge debt, file bankruptcy, etc.

Some changes are positive.  All debtors will have to get credit counseling before they can file a bankruptcy case -- and additional counseling on budgeting and debt management before their debts can be wiped out. Some filers with higher incomes won't be allowed to use Chapter 7, but will instead have to repay at least some of their debt under Chapter 13

Then there are income and "means" tests.  Quite frankly, if you have $100,000 stuffed in the bank, make $200,000 a year and have $500,000 in debt, there is no way you should be able to file bankruptcy.  On a more realistic scale, what they do is take all of your bills under a repayment plan and see if your income - your bills = $165 a month.  If you have more than $165 a month left over after the allotment (yes, this includes food, housing, child support, student loans, etc) then you have to file Chapter 13 and pay your debt back.  If it is less than $100, then you can go Chapter 7.  If it is inbetween you must figure out whether what you have left over is enough to pay more than 25% of your unsecured, nonpriority debts (such as credit card bills, student loans, medical bills, and so on) over a five-year period. If so, you flunk the means test, and Chapter 7 won't be available to you. If not, you pass the means test, and Chapter 7 remains an option.

So, if a person were to have a modest income and unsurmountable medical bills, they probably WOULD be able to file bankruptcy.  Bankruptcy is not a "free ride" or a "do-over" or a "mulligan".  It is a last resort for those who truly cannot pay their bills.  The new laws are to make sure that it remains just that. 

[Jade]

First, the new laws do not prohibit anyone from filing bankruptcy.  They make it harder to claim Chapter 7 which is where all debt is dissolved.

Second, the laws are there to make sure that people don't run up huge debt, file bankruptcy, run up huge debt, file bankruptcy, etc.

Some changes are positive.  All debtors will have to get credit counseling before they can file a bankruptcy case -- and additional counseling on budgeting and debt management before their debts can be wiped out. Some filers with higher incomes won't be allowed to use Chapter 7, but will instead have to repay at least some of their debt under Chapter 13

Then there are income and "means" tests.  Quite frankly, if you have $100,000 stuffed in the bank, make $200,000 a year and have $500,000 in debt, there is no way you should be able to file bankruptcy.  On a more realistic scale, what they do is take all of your bills under a repayment plan and see if your income - your bills = $165 a month.  If you have more than $165 a month left over after the allotment (yes, this includes food, housing, child support, student loans, etc) then you have to file Chapter 13 and pay your debt back.  If it is less than $100, then you can go Chapter 7.  If it is inbetween you must figure out whether what you have left over is enough to pay more than 25% of your unsecured, nonpriority debts (such as credit card bills, student loans, medical bills, and so on) over a five-year period. If so, you flunk the means test, and Chapter 7 won't be available to you. If not, you pass the means test, and Chapter 7 remains an option.

So, if a person were to have a modest income and unsurmountable medical bills, they probably WOULD be able to file bankruptcy.  Bankruptcy is not a "free ride" or a "do-over" or a "mulligan".  It is a last resort for those who truly cannot pay their bills.  The new laws are to make sure that it remains just that. 

The new laws make it next to impossible to declare bankrupcy.  By the time you meet the test, you have already lost everything.

A person who makes $200,000 a year with $500,000 of debt isn't a person facing bankrupcy.   

[Dallas]

The new laws make it next to impossible to declare bankrupcy.  By the time you meet the test, you have already lost everything.

A person who makes $200,000 a year with $500,000 of debt isn't a person facing bankrupcy.   

You know, just repeating your assertions is really not a very effective debate tactic.

Dallas

[Jade]

The new laws make it next to impossible to declare bankrupcy.  By the time you meet the test, you have already lost everything.

A person who makes $200,000 a year with $500,000 of debt isn't a person facing bankrupcy.   

You know, just repeating your assertions is really not a very effective debate tactic.

Dallas

Handslapping isn't very effective either.  But I don't see you stopping. 

[Dallas]

You know, just repeating your assertions is really not a very effective debate tactic.

Dallas

Handslapping isn't very effective either.  But I don't see you stopping. 

I'm not the one making the assertion.  The onus is on you to support your assertion.  If pointing out that you're just repeating your assertion and not supporting it is handslapping, I guess I am guilty as charged.

Maybe if instead of just repeating your assertion you also screamed it, maybe that would support your assertion.  Or not.

Dallas

[Jade]

You know, just repeating your assertions is really not a very effective debate tactic.

Dallas

Handslapping isn't very effective either.  But I don't see you stopping. 

I'm not the one making the assertion.  The onus is on you to support your assertion.  If pointing out that you're just repeating your assertion and not supporting it is handslapping, I guess I am guilty as charged.

Maybe if instead of just repeating your assertion you also screamed it, maybe that would support your assertion.  Or not.

Dallas

Like I said, handslapping doesn't work.  But if handslapping is what makes you happy, go for it.