frequently asked questions bankruptcy
Should i file bankruptcy?
I just got off the phone with a good friend of mine, he was repeatedly asking me the question “should i file bankruptcy”?
He and his wife owe about $100K in credit cards. The both of them originally held great well-paying jobs which they lost due to the economy and recent cost-cutting by their companies.
They were intending to repay the debt but as a result of their job loss, their current employment which is only paying a fraction of their original income is significantly not enough. They are being hounded frequently by creditors as well. I’m unsure what is the best option for him.
I am hoping i will be able to answer his question “should i file bankruptcy” in a assured manner to calm his nerves down. Is it the only option with regards to this issue of his? Any alternatives?
With regards to your friend’s question “should i file bankruptcy?”. There could be some alternatives. I will try to cover them as well as talk about issues of bankruptcy.
The first choice would be to formulate a practical budget around his monthly expenditures. Remove existing debt services but keep mortgage and car payments in the budget. Calculate if the money can be paid back in 3 years under existing interest rates.
The second choice is to go through organizations like the Consumer Credit Counselors. They can negotiate a repayment plan for you assist in making a budget. Creditors are sometimes a bit more lenient with people participating in such programs
The last option would be to file bankruptcy. The 2 main chapters in the states which people use to file bankruptcy are chapter 7 and chapter 13.
Under the Fair Credit Reporting Act, your personal bankruptcy will be under your credit report for the next 10 years. And for the case of a chapter 13, you are not permitted to get additional credit unless granted permission from a bankruptcy court.
There is no particular magic calculation as to decide whether bankruptcy is the best option for you. I’ve listed a link for a confidential bankruptcy evaluation. I wish your friend all the best. “should i file bankruptcy?” That is a question only your friend can ultimately answer himself.
