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Author: warrl Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 308349  
Subject: Re: STRUGGLING COLLEGE STUDENT NEEDS YOUR ADVICE Date: 5/20/2001 5:52 PM
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Most states allow you to keep a car and "some" states even allow you to keep a primary residence (not all states do this although most people believe it to be so).

More typically, states will allow you to keep up to a certain amount of equity (its value minus what you owe on it) in an automobile, and also (different amount) in a primary residence. However, if you do this, you'll also keep (and continue to pay) the loans on those items.

Cars and homes are usually sold on secured loans. You do NOT get to keep the security on a loan, and discharge the loan, in any version of bankruptcy law I've ever heard about.

In this case, you have no equity in the car, and no primary residence. An issue you have is that if you declare bankruptcy and don't decide to keep the vehicle you are currently upside down on, you may need to buy a vehicle (look at public transit in your area) and you won't be able to borrow on it until after the bankruptcy is complely discharged (probably 4-6 months after you file). And then it'll be quite chancy that you'll be able to borrow for several years, unless you can put 30% or more down.

However... THE MOMENT YOU FILE, you are protected from creditors for past debts. That includes your car loan and your credit cards. It'll probably be 1-2 months before you lose the car. In that time, dump your credit-card and car payments into a savings account, and then look at picking up a car where you can lay down half to 3/4 of your savings and drive out owning it free and clear.

(If creditors call you after you file, inform them that you've filed and give them your bankruptcy attorney's name and phone number. If the same creditor calls again, repeat. On the third call, start saying the magic words... "you are in violation of federal bankruptcy laws" and "harrassment" are good magic words...)

That said... if you are making at least minimum payments on everything and still have a couple hundred dollars left at the end of the month, start throwing them into savings until you have at least a month's worth of after-tax income in savings. Then start throwing the monthly surplus at your highest-interest debt. You aren't in totally over your head... close, but not quite.

Also go visit the Fool's Living Below Your Means board. And do a search for the Snowball Calculator; you may be surprised at how quickly you can get clear, if you act in the most intelligent manner.
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