I need help guys (question)

[martinezsam2495]

Ok, there seems to be a financial situation, and a family member is planning on filing bankruptcy.
Can you guys let me know the pros and cons of bankruptcy?
What could happen?

[striker12]

well i cna tlel you 1 thing that happen when you go and do bankruptcy you lose alot of your credit score maby even all of it and then you will have to get a new credit card and ge tit back up witch could take some time if you ever wanted to get a new car.

[got_a_300]

There is at least 2 different kinds of bankruptcy for the person that
wants to go and file one kind is the one which wipes out all of your
bills and then there is the other one where you pay a reduced monthly
payment on everything.

The one that wipes out all of your bills is called a Chapter 7 I do
believe and the one where you still pay off everything is a Chapter
13. The only drawback I know of to filing a chapter 7 is I think but
I'm not sure since I'm not a lawyer is that they can come and take
back their stuff like say like a car, house, furniture,etc. etc.

If you file the one where you still make the reduced monthly payment
as long as you keep the payment up they can not come and take any
thing away from the person and they can have no kind of contact with
the person like calling and harassing them for a payment.

As striker12 said it will hurt the persons credit score sometimes but not
always badly for up to 10 years before it will get clear again but there are
also credit card companies that will help a person re-establish their credit.

[ArtVandelay]

I work for a credit union and its as simple as this: last resort only. Look into debt consolodation (which will hurt the credit) and stuff like that. There are far fewer lenders who will help someone re-establish credit these days.

Its very long term. Its also very personal. Make sure you offer all the emotional support you can. Things like this can lead people into deep depression. Suicide happens on occasion. Make sure you keep things private, but offer every last bit of support you can.

[Rdmonster]

I'm not sure of the types but I think got a 300 is right on what it involves. My cousin has done it twice.

My friend and his wife did it. My rate on a used car is 3.6 %.... His wife's rate on a used car is 18%..

I'd say last resort but support them as best you can.

[martinezsam2495]

Thanks guys, I'm trying to talk him out of it, the thing is, one of my family members said they would pay him for a tv, but to use his credit, and he did. It ended up where one of my family members was unable to pay it, and left a TV balance of $7,000. So, instead of paying $7,000 for a TV, I think they are going to file a Chapter 13. But as far as losing things, your credit is the only thing that gets messed up? Or do they take away your home, car, etc.?

[billf]

A bankruptcy lawyer will know what and how to file for each state to minimize the damage. The thing is, they say it stays on your credit report for 7-10 years. My brother-in-law file 15 years ago and some places still hold it against him.
On a side note; learn from this family members mistake. Never trust family with money. My step-daughters have screwed me over so many times yet my wife thinks I'm the mean one when I want my money back and tell them no more, never, ever again. One of them hasn't made a payment is almost two years and owes me $5,000.00

[ArtVandelay]

Thanks guys, I'm trying to talk him out of it, the thing is, one of my family members said they would pay him for a tv, but to use his credit, and he did. It ended up where one of my family members was unable to pay it, and left a TV balance of $7,000. So, instead of paying $7,000 for a TV, I think they are going to file a Chapter 13. But as far as losing things, your credit is the only thing that gets messed up? Or do they take away your home, car, etc.?

Is the TV the only issue? Don't let him file if it's just a TV, especially if he is able to pay for it. Work with the creditor on a payment plan or something. But if it's just the TV then bankruptcy will be an awful solution. Bankruptcy costs money, too. If a $7000 TV is the tipping point, then I doubt bankruptcy would help at all.

Plus, a judge will ultimately have to decide if they qualify for bankruptcy. I'm not a lawyer, but it's my understanding they will tear through all your financials and only grant the bankruptcy if it's proven the person simply cannot pay the debts they have under any circumstance.

What do they take? Well, that's tough to say, because bankruptcy DOES offer a certain level of protection, BUT... I think in most cases people are already in default by the time the bankruptcy is granted, so it's up to the creditors what actions are taken. Nothing is official until the bankruptcy is granted. Prior to that, anything is fair game. That includes repossession and foreclosure.

Do this right now: Have him pull his credit report if he hasn't done so already. Go to www.annualcreditreport.com. The credit report is COMPLETELY free, he will simply have to answer questions to confirm his identity. If you want to see the scores, those cost money, but the reports will give you a great look at what you need. It will let him know how behind he is on his bills. From there, he can start contacting the creditors and finding out what payment plans or relief is available. If he has a clear title on his car, then he's fine there. If he owns his house outright, then he's fine there. You need to find out what debt is secured and what debt is unsecured, because the secured debts do have a chance of being surrendered.

Filing bankruptcy will vary in fees from state to state, but look at this (I just did a quick google search and kind of picked the easiest one I could find): http://www.debtkid.com/bankruptcy-how-much-does-it-cost
It very well might cost thousands of dollars to file bankruptcy, and if it's not granted, I think he's out the money. I would REALLY consider every other option possible before going that route, ESPECIALLY if it's just over a TV. Go get the TV. Sell it for $5000. Put that money in a savings account and continue making the payments. $7000 for a TV? That's a crazy good TV. I have a Panasonic Plasma with a great 1080p picture, and it was under $1000. I'm sure you can get $5000 for a $7000+ tv.

Do everything you can to avoid this, but if it's really bad and it's gotten to that point where this is your only option, you really need to get legal advice. No one on this forum is in the position to offer that kind of advice.

[ArtVandelay]

A bankruptcy lawyer will know what and how to file for each state to minimize the damage. The thing is, they say it stays on your credit report for 7-10 years. My brother-in-law file 15 years ago and some places still hold it against him.
On a side note; learn from this family members mistake. Never trust family with money. My step-daughters have screwed me over so many times yet my wife thinks I'm the mean one when I want my money back and tell them no more, never, ever again. One of them hasn't made a payment is almost two years and owes me $5,000.00

This is, also, very true. I can tell you that I've seen quite a few credit reports with a bankruptcy on them, and it's glaring. It's almost always a denial from there, but the place I work for does our best to be thorough. We will look at the whole picture. Now... IF someone has a bankruptcy the chances of getting any loan have decreased substantially, but IF they have had a solid job for a long time, with direct deposit, and they agree to do automatic payments directly from that direct deposit, and their debt to income ratios are superb, and they have a long relationship with the credit union... Well, from there their chances go up to 50%, but I still don't fully understand how the underwriters decide... Sometimes I swear it just depends on how they're feeling that day, because i'll see some bankruptcies that I think don't have a chance in hell, and they make it, while others I figure might be okay don't make it. But I think they also go through the accounts and find out how often the account is overdrawn, how many bounced cheques, etc.... So it's quite a process.

But even then, the rates are ridiculous. You'll pay TONS, TONS more than $7000 in finance charges if you have bad credit.

Just imagine if you take out a $15000 car loan, at 5.00% (and that's considered a BAD rate these days...) for 5 years. You will pay about $1985 in interest for that loan with a monthly payment of about $284. And that's for a BELOW average credit score.

Now imagine that 18% someone else mentioned (the place where I work caps rates at 16.99%, but I don't remember ever seeing anyone who has been approved for a car loan at that rate). Let's take the same 15000, at 18%, for 5 years. You'd pay about $7854 in interest with about a $381 monthly payment.

It's expensive.

[75lockwood]

While i don't know much about filing for bankruptcy, i could never understand why people go out and buy things they can't afford, this kid at my high school keeps talking about how he's going to go lease a $30,000 car, and i'm like ok.... i would rather buy a $1000 civic and start saving money rather than paying $400 a month for a brand new car..... I'm under the opinion that you should not buy/lease what you can afford now, but what you can afford when everything goes to hell.

Just my 2 cent's.

[martinezsam2495]

Well the TV is one of the issues, another family member borrowed money from him, and got a car. But is unable to keep with the payments on a car, to top it off, got in accident with a car, still owes 8,000 and since the car is crashed, (fixed already) the max someone offers is 4,000, which basically means they get the car for free, and they still have to pay 4,000. I really don't want him to file bankruptcy, but it's hard... Older adults don't think young people have much knowledge of the real world... I know this is in a way true, but I'm putting in my time to try to understand it and give advice...

[RoccoRock]

My wife and I declared bankruptcy several years ago. We tried debt consolation, but we were in far too big of a hole. We did chapter 7. We could kept both cars, but decided to only keep one and get rid of one payment. We could have kept our house, but we wanted to move out of state, and our house was worth less than we owed, so that was the best way.

Someone said you can't buy a new car, that's not true. you can go buy a car the day you are dismissed. Now the interest rate may be a little high, but they won't dent you. Everything else takes about 7 years to clear up. I would recommend not doing it if you have the option, but if you have to it's not the end of the world.

[martinezsam2495]

thanks everyone it's much appreciated

[i2icustom]

I work for a credit union and its as simple as this: last resort only. Look into debt consolodation (which will hurt the credit) and stuff like that. There are far fewer lenders who will help someone re-establish credit these days.

Its very long term. Its also very personal. Make sure you offer all the emotional support you can. Things like this can lead people into deep depression. Suicide happens on occasion. Make sure you keep things private, but offer every last bit of support you can.

Sadly this is an all too common problem these days.