Filing Chapter 7 : (

[Markwallace]

So I have decided to declare chapter 7 bankruptcy. Please, I know the ramifications… I realize the after effects of making such a decision. I know it should be the last alternative.
That aside, I was wondering if you guys could help with a few questions I had.

All of my debt is in the form of credit card debt. Around $15,000 or so. I have 5 cards total and most of the debt was personal products and supplies for an ill fated business I tried to get off the ground. I make 9.00 an hour now and no way can I continue these payments… its just futile. I pass the means test easily.

My question is this though, I have some money left on several cards. Meaning I haven’t reached my limit on at least 3. A couple thousand I believe. If I am filing for chapter 7, and aside from the ethical assertions, would it not be prudent to use that money while I can? I mean, I am going to be free and clear irregardless by the end… why not take advantage of it. I have nothing they can take in form of assets to recoup(no house, no car).

Also, could I do a cash advance on the funds? So I have cash to be used to pay a bankruptcy lawyer among other things. Again, if it’s all going to be washed what is the point of leaving it on there? I’m sorry but I simply lack compassion for the folks at Bank of America and Chase… believe it or not I think they are going to be just fine in the end.

[yourbeginnings]

I really don't know much about the new bankruptcy laws, however I think it would look very suspect to the judge/arbitrator assigned to your hearing. The credit card company's can and they do send representatives to the hearing. If they can prove that you max out your cards intentionally, it may cause the judge/arbitrator to rule in the credit card company favor.

With $15,000 in debt, you probably will be able to make it without declaring bankruptcy. I would start with the credit card that has the least amount on it. Work to pay that card off, then move to the next one and so on.

I had about the same amount of credit card debt. I got part-time job in the evening and every penny I earned went to the credit cards. It took about 2 years to pay everything off.

[Frugal Fannie]

I think the key part of your statement is this "why not take advantage of it". This is definately at the far end of the moral scale. Any debt that you don't pay off, including ths "extra" money, will end up being paid for by other people through higher interest rates.

Have you called your CC companies and asked for an interest rate reduction? Don't take the first no you hear, keep going up the ladder. Let them know that you want to pay off the debt. Have you sold anything you can to help pay off this debt? Have you taken a second job? Have you cut out all extras? You need a roof over your head, food, clothes on your back, heat and water. Extras are cell phones, cable, cars for many folks, CD's, internet, that new shirt, and that cup of coffee or that glass of beer.

I hope that this doesn't sound sanctimonious but we paid off $30,000 in CC debt and $10,000 in school loans. It was not easy. We cut back everything to pay the people that we owed. Our debt was our responsibility.

[rachael24]

Big thanks for the input...My dad filed for bankruptcy a few years ago, and I was really curious about what goes into it. If you have any more info, it would be awesome!

[jdp]

I'd say talk to a bankruptcy attorney. I am sure he/she would advise you not to be "using up" those "unused funds" (they aren't YOURS). I'm pretty sure they can deny the bankruptcy if they see you running up bills you know you can't pay.

Besides that, I have to ask, why are you declaring bankruptcy with just cc debt? If they aren't coming after a house, your only means of necessary transportation or your paychecks why not keep working with them? I don't know the banks you mentioned but during hard times the "big" cc companies were easy for me to work with. It was the little ones that were buttheads. Discover Card was unbelievably fantastic.

If you were unable to work at all or they were taking all of your pays you needed to live on while you tried to work through this I would understand. I don't know what your situation is.

[Markwallace]

Thanks for everyone's contribution to the topic so far.

Bankruptcy is a big deal, I get that. In essence it could ruin most peoples lives. But I asked myself, what exactly are the major ramifications. There are just a few, albeit large, considerations why people are and should be so afraid of bankruptcy. Homes, Cars, and Education.

The house I am in now, I plan on staying for the rest of my life. So I dont care about being financed for a new one. It doesn't affect me, its not in my name and I pay my share of the mortgage. Cars... I have no need for a lexus or anything else. A smart buyer pays cash and they buy 2-3 year old reliable used cars anyways.

Education. If you have kids you are destroying their chances of college if you try to help finance it with a bankruptcy settlement on your credit report. 1. I dont have kids nor do I want them. 2. I think a kid should pay for college on his own anyways.

So I am curious as to SPECIFICALLY how declaring bankruptcy is going to hurt me. I dont ever want to use credit again in my life, the first thing I read or see on TV when giving out advice for saving money is DO NOT USE CREDIT...

It will take me 5-10 years to pay off this debt(doubling up payments).. all those payments, all those finance charges could instead be going right into an IRA account and a side account for a new(used) car in the future. Instead of wasting it away and never seeing it again.

So tell me, please, how exactly is bankruptcy going to hurt me. Without using generalizations like "its going to ruin your life" or "you never know if you need credit"... specifically how is it going to hurt me. I see know downside.

[Frugal Fannie]

Originally Posted by Markwallace

It will take me 5-10 years to pay off this debt(doubling up payments).. all those payments, all those finance charges could instead be going right into an IRA account and a side account for a new(used) car in the future. Instead of wasting it away and never seeing it again.

I guess we just see this diffferently in a terms of morality. Why should you get a free pass on your debt so that you can put money into in IRA and fund a car? If you bought things on credit, why are you not responsible for paying back that debt? By paying it back, you are not "wasting it away", you are holding up your end of the bargain that you made with the CC companies.

You should check out the book "Your Money or Your Life" and review their method of "snowballing" your CC payments. There is no reason that it should take you 5 - 10 years to pay off $15,000.

I don't know what the ramifications would be to you to file bankruptcy and I'm not really concerned about how it would "hurt" you. I think you should be more concerned about your moral responsibility to pay for what your purchased.

(I'm beginning to think that this may just be a troll here to stir up some trouble!)

[Markwallace]

Originally Posted by Frugal Fannie

I guess we just see this diffferently in a terms of morality. Why should you get a free pass on your debt so that you can put money into in IRA and fund a car? If you bought things on credit, why are you not responsible for paying back that debt? By paying it back, you are not "wasting it away", you are holding up your end of the bargain that you made with the CC companies.

You should check out the book "Your Money or Your Life" and review their method of "snowballing" your CC payments. There is no reason that it should take you 5 - 10 years to pay off $15,000.

I don't know what the ramifications would be to you to file bankruptcy and I'm not really concerned about how it would "hurt" you. I think you should be more concerned about your moral responsibility to pay for what your purchased.

(I'm beginning to think that this may just be a troll here to stir up some trouble!)

I'm trying to get to the root of the consequences of bankruptcy. It is a major decision in my life and I would like to explore the full extent of its ramifications. You seem to confirm my suspicions though, that this is all about morals "holding up your end of the bargain" as you say.

I am looking for finite reasons as to why I should not go through with it. All I get in response is "you can pay it back with 2 jobs" or "You borrowed it, You have to find a way to pay it back"... That's it? That's the extent of why I shouldn't declare bankruptcy and start fresh? because at the end of the day 8 years from now I will have a happy warm feeling about paying Bank of America 3 times the money I initially borrowed?

I told you I have no interest in purchasing a house or expensive car, and those are the only two things you should ever use credit for anyways. If my credit is ruined, am I not better off in the long run paying for everything with cash? Isn't that the first rule in any personal finance book? I have read many and they all seem to harp on that.

[StudentMom]

The personal products you purchased.. Can you sell some of them? The unnecessary ones? (I know ALL of my CC debt was because I bought stupid, unnecessary stuff) Pick up some extra work? Tighten your frugal belt big time? Or is this about you wanting to get rid of the debt by declaring bankruptcy? IMHO, you should find a way to pay them off. Call the CC companies and make a deal with them. Good luck!

[Frugal Fannie]

If you are looking for the legal ramifications of declaring bankruptcy, then you need to consult an attorney. That should run you about $200 an hour which would be better spent paying back your debt.

I can tell you that employers look at credit reports and you may lose out on a job because of bad credit. You will also pay more for insurance. Since none of us can see into the future, you don't know that you won't need a CC at some point. What would you do if you had an emergency and needed an airline ticket but didn't have the cash but would have it in two weeks?