the case *for* bankruptcy?

iVillage Member
Registered: 09-23-2004
the case *for* bankruptcy?
21
Thu, 09-23-2004 - 2:33pm
I'm trying to help my sister make a painful decision. I see the light at the end of the tunnel for myself, but I struggled with the spectre of bankruptcy several times. Now she's considering bankruptcy, and I'm trying to help her get past the shame of even saying the word. Honestly, since I read an article on MSN Money and saw a past roommate positively *enjoy* the effects of Ch. 7, I'm gung ho! Read on for her situation, but I'm pretty sure that Ch. 7 is good fit and appropriate for her, not an escape or enabling. But what would happen if she didn't declare? What could the credit card companies do to her? Sue? Garnish her wages? She needs to know what "the worst" is, because she has only vague fears and threats, not *facts*. (And frankly, I want to know, too.)

She's already been to every credit counseling service out there and they've all painted horrible pictures for her of bankruptcy -- but their solutions are no better. She owns nothing -- no car, no house (rents), is single, owns only secondhand furniture and clothes, has no 401(k)/savings/life insurance -- nothing, she has absolutely *nothing*, and is terrified that bankruptcy would involve someone coming to her house and taking away her beaten-up shoes and thrift-store blender because "You're not allowed to have them." She only makes $31K, owes $35K on credit cards (all at 29.99% interest), and has $60K in student loans.

Here's the problem: The student loans are cosigned by our parents, whose horrific money management and credit woes have ruined her carefully balanced finances. She was scraping along OK, making every single payment, living within her means... when they defaulted on something and WHAM. Up went every credit card, and now she can't afford even the minimum payments on those cards. Every time she opens a statement, it gets worse. She can't get rid of the student loans and hence, the disastrous financial link to our parents. But if she could end the nightmare of the credit cards, she'd be able to live again -- and of course, keep paying on her student loans.

I just can't get a good reason from anyone why she *shouldn't* declare bankruptcy. She's in therapy and working on the reasons she racked up credit card debt in the first place (making ends meet while she was unemployed), has resolved firmly *never* to get tangled up with those awful companies again, has a budget -- everything except the ability to get past her shame. It just kills me to see her struggling under this massive weight and the credit card companies making it harder and harder for her. I know she signed the agreements -- but she was 18, in college, and in a family where debt was abused like alcohol. She's in recovery, and wants to end this nightmare. And I can't think of a reason that bankruptcy couldn't be that answer.

iVillage Member
Registered: 06-15-2003
Sun, 09-26-2004 - 6:03pm

Absolutely, it is called Universal Default, if your name is on the account, joint, co-signed, whatever may be, your other cc's will definetly catch wind of it and take advantage of it.


Unfortunate but true, and as soon as these cards are paid off I will never touch another one. Thet are getting worse and worse.


okeefester3


~okee

(formerly oneandonlyother)

iVillage Member
Registered: 04-30-2003
Mon, 09-27-2004 - 1:46pm

"The credit card company said that because her loan cosigners had defaulted on that cosigned loan "


Unless I read your first post wrong, you didn't state this. Lemme go look. Ahhhh...you wrote, "when they defaulted on something and WHAM."


Which lead me to believe




my pet!

iVillage Member
Registered: 04-30-2003
Mon, 09-27-2004 - 1:50pm

I agree. According to the BK laws, if you can pay off your debt in 3-5 years, the courts MAY NOT grant you a BK for that matter. OR they will grant you one, but it will be a chapter 13, not chapter 7.


ch. 13 is where you have a plan to pay it off, but smaller amounts


ch 7 is where all your credit is wiped clean.


I don't agree with Suze on many things. There was something I saw the other day and I was flabbergasted at teh stupid advice she had given. IRL, things don't work out as simply as she says they will. That's one reason I have a prob with her advice. She doesn't take "life" into consideration.


btw, i went to talk to a bk lawyer, he told me my chances of getting one, was slim cuz i could easily pay off my debt in about 3.5 years....assuming I live at home with my folks and not pay rent. he said the courts may not grant me a chapter 7. I figured, I'd just work on my debt then. instead of fiiling bk.

~Cher




my pet!

iVillage Member
Registered: 04-30-2003
Mon, 09-27-2004 - 1:55pm

I just wanted to say thanks to everyone who responded to my hijacked question (sorry about that).


But, I guess what I wanted to know is if TWO ppl are on ONE joint account. BUT, they default on something OTHER THAN that account, can their other accounts be affected? I don't think so, right?


i.e. I have a joint cc with my xh. If I default on my student loans, will that affect him? Because we share a joint cc?


I understand if you default on something joint it can affect




my pet!

iVillage Member
Registered: 08-06-2003
Mon, 09-27-2004 - 2:19pm

i.e. I have a joint cc with my xh. If I default on my student loans, will that affect him? Because we share a joint cc?>

It depends on whether he really is a true "Joint cardholder" or if he's just an "authorized user" on the account. From what you said earlier (He cannot make changes, cannot order a new card) it sounds like he is only an authorized user, in which case, he is NOT at all responsible for ANY of the charges on the account, even if he makes them, so no, if there is a default on your credit (even on that account), it should not affect his credit in any way.

However, if he is a true Joint Cardholder, he would be able to make changes, request new cards, and do everything to the account as if it were his alone, and *both* of you would be legally responsible for it. In this case, any defaults on your other personal accounts could very well affect his credit too.

***

iVillage Member
Registered: 04-09-2003
Mon, 09-27-2004 - 2:38pm
I believe that yes it can. My dh is not on the only credit card that I have, nor is his name associated with any of the medical bills I am late on (I carry the insurance for the family and the bills are for the kids). However, his credit rating is affected by my late payments. So while he pays everything he is resposible for on time, I have not and that has made his credit rating lower and when we refinanced our mortgage the best rate we could get was 7%. So while I don't know about defaults exactly, if your question is can his credit be affected because you share one acct I would say yes. I think they pick up all the info by the social security number and if his number is on that acct they will pick it up and associate it with yours. At least, this is my understanding of it.
iVillage Member
Registered: 04-30-2003
Mon, 09-27-2004 - 4:06pm

Just an FYI, but thanks everyone for your info.


The CC i have with my xh is a little weird. It's thru my credit union. But because the account was mine first, and I am the primary on ANYTHING related to the account, I can change things. XH is a joint on the card, but because the main credit union account is mine, of which he's not on, he can't change the address or order cards for himself going to a new address. I know, it's strange, but it's a credit union. They have different rules. Well, mine does. lol.


As for affecting w/o it being a direct account. all i can say is....THAT SUCKS. Oh well for XH then. lol. cuz my credit is not the greatest. Maybe that's why my cards keep going up. Hmmm.........I wonder.

~Cher




my pet!

Avatar for zaboz
iVillage Member
Registered: 03-26-2003
Tue, 09-28-2004 - 10:39am
This is a really personal decision that I think your sister should make on her own. Some people don't believe in bankruptcy and if you talk her into it, you could make her feel worse than she already does. Bankruptcy is not something you can ever take back, so it should be considered seriously. So it's nice of you to be concerned, but maybe you can offer both sides.

Here are some positives to NOT declaring bankruptcy, since you asked....

-The dignity of repaying what she borrowed

-The discipline and money management skills that paying it off will teach her

-The relief of never having to list bankruptcy on a job or mortgage application

-Not having a bankruptcy listed for the next TEN years on her credit report

-The knowledge that her actions won't add to higher interest rates and aggressive

collection pratices towards others

I'm not saying she should or shouldn't do it, but I don't think it's something to take lightly either. But either way, I wish her the best in getting this sorted out! Even if she declares bankruptcy, won't she still be linked to your parents through the student loans?

iVillage Member
Registered: 04-23-2003
Tue, 09-28-2004 - 3:26pm
Lurking......because you are the primary card holder you should be able to remove him from the acct. I'd think anyway. I know when my parents got divorced my dad had my mom removed (w/o her knowing) from his Discover card. She couldn't use it. I guess it's not such a big deal if he doesn't use it but I'd say better safe than sorry. Does he owe $$ on it too, something that was awarded to you in the divorce? Than I can understand keeping him on but just wondering.
iVillage Member
Registered: 04-30-2003
Tue, 09-28-2004 - 5:54pm

Edited to shorten this. I just realized that the cc isn't really a cc. It's a "loan" by the credit unions standards. So like any loan, you can't "just remove" a name. You have to open a new loan to cover that one, pay it off essentially, and then the name and account is gone.


Sorry for all the confusion. And sorry for hijacking the thread.



~Cher




Edited 9/28/2004 8:22 pm ET ET by cherbear017




my pet!