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Would Filing For Bankruptcy or Declaring Bankruptcy Do Me Any Good?

I am in debt, Mostly from medical bills and student loans, but also because i was young and dumb had bills in my name i knew i couldnt afford

how does filing bankruptcy do good? would it help me? considering i am 25 with 3 children now i want to have good credit and try to start buying a house in the next five years what would filing bankrptcy do i dont understand any of this, How would it benefit me and which chapter would i know to file?

Bridgette

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  • Michelle13784

    There is great advice on here about bankruptcy as our economy has destroyed a lot of people’s credit and increased debt. After reading the comments I might actually consider this option!

  • Msmina78

    Thanks for asking this , so many people seem to be in the same boat

  • laura579

    bankrupcy will not erase the student loan debt. i would suggest getting your student loan payment reduced. i submitted finiancial documentation and had my student loan payment reduced to almost nothing.

    i would also suggest taking inventory of all of your unsecured debts that could be discharged in bankrupcy, and then assume that you could settle them for about half that amount. how much is that? if it is more than a 50% of your annual family income then seriously consider declaring bankrupcy. if it is less, assuming the bills are still current, stop paying them, and gather as much cash as you can to make settlement offers in six months time.

    when we were faced with a financial crisis, and had $1700 in credit card debt we could not afford, we stopped paying for 6 months, then called all of the cards to try to illicit settlement offers. we sold stuff on cragslist, lived very frugally and saved our tax refund. we ended up settling for about $9000. 

    bankrupcy stays on your credit report longer than debt settlement, and when you apply for a mortgage, even after the bankrupcy is off your credit report, they still may ask if you have ever declared banrupcy.

  • Msullivan

    Bridgette,

    Filing for bankruptcy is a very big step. It will affect your ability to get credit for at least seven years and really will define you as a credit risk for many years. You will want to have a serious discussion with a bankruptcy attorney before making a decision.

    There are two common forms of consumer bankruptcy (I’ll assume you don’t fish or log for a living). Chapter 7 is the preferred form for most consumers because it can erase a lot of consumer debt and can get wrapped up in a fairly short time. It does not typically erase student loan debt so don’t expect that to go away.

    There is a means test for Chapter 7 filing and if your income far exceeds the typical income in your state you may not be eligible. If you earn in excess of $60,000 or so there is a good chance you won’t qualify but each state has a separate standard.

    Chapter 13 bankruptcy typically involves paying back as much of your debt as possible by living on a very tight budget for up to five years. At that time the remainder of your qualified debt may be erased. It does not permit a lavish lifestyle and it certainly isn’t likely that you would buy a house in five years.

    There are a number of factors concerning real estate and secured loans that require a legal discussion, but in general a Chapter 13 filing is tougher with fewer financial benefits and should only be pursued if it is the only possible option. Either option will require legal fees so you need to be sure that the financial benefit outweighs the cost and damage to your credit.

    You might want to start with a visit to a credit counseling agency to find out if you have other options. Check with the Better Business Bureau to find an agency near you and get a better understanding of your financial picture.

    Good Luck!

    • http://GetOutOfDebt.org Steve Rhode

      Actually, it’s getting very easy to get credit following bankruptcy. New York Times article out today on just this issue.

      And it’s easy to rebuild credit following bankruptcy as well. I even wrote this guide to do it. http://getoutofdebt.org/32410/how-to-easily-rebuild-your-credit-and-have-good-credit-again

      For many, the cost of bankruptcy and immediate benefits of protection of creditors, along with the rapidity in which credit can be rebuilt make bankruptcy a logical solution.

  • KimColeman

    Hi Bridgette,
    I am a consumer bankruptcy attorney but in many cases I help my clients explore other options prior to, and sometimes instead of, filing bankruptcy.  While I do not agree that bankruptcy necessarily should be the ‘last resort’ considered, I do not believe someone should jump into it without exploring all options.  I will say though that if you are unable to pay your debt without depriving your children or being able putting a little savings away for emergencies, then bankruptcy could be your best option.  Your family’s well-being should always come first.  I wrote an article regarding just this subject here: http://www.colemankempinski.com/bankruptcy-as-the-last-resort/ Prior to advising you whether to file I would have to know, among other things, facts about your past and present income, the amounts and specific types of your debt, the types and values of your assets, and your future prospects regarding your income.  Sometimes it may make more sense to try debt settlement or consolidation (but please do not hire anyone to help you with this without first researching them here on getoutofdebt.org).  This may be the best option if you have small amounts of debt and few creditors.  Typically if a client owes less than $10,000 I will try to help the client with something other than filing bankruptcy.

    One thing you should consider about bankruptcy is that you can only receive a discharge of your debt once every 8 years.  Also, depending on the type of mortgage you are trying to get, many lenders will not commit to a mortgage loan until a certain time has passed after you have filed bankruptcy – commonly about 2 years but could be longer or shorter depending on the lender.

    On the other hand, bankruptcy can be the quickest way to rebuild your credit.  So long as you do not start putting new negative information on your credit report after bankruptcy it will climb up pretty quickly (this is typically true if you start out with a lower credit score).  You can also do things to make your score go up quicker after bankruptcy such as getting a secured credit card or an installment loan on a car or other item (of course you must pay within the terms).  

    I suggest that you find a bankruptcy lawyer in your area who offers free consultations.  Here in Philadelphia every bankruptcy attorney I know offers free consults.  You can search for one on this site (look to the right under ‘Important Posts’) or ask people you know if they know of any good ones.  Doesn’t hurt to get a few opinions and to find someone that you like and can work with if you do decide to file.

    I wish you the best of luck!

    Kim Coleman
    Philadelphia Bankruptcy Lawyer
    http://www.colemankempinski.com

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