URGENT QUESTION!

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“Dear Steve,

I am now getting phone calls from creditors with deals to wipe half off & low monthly payments – I am worried that the wiped off half will be given to a collection agency later on.

Where were these people when I asked for help before I got behind? I think we should just finish the paperwork & get on with it – we already have our credit counseling certificates that you need before you can file.

I am worried about paying those RE Taxes with that credit card but I am out of options. One other thing & will glady contribute more to your fund if necessary – one of the unsecured loans is trying to tell me that having them write it off will be worse on my credit than bankruptcy – scare tactic?

Janet”

The Answer:

Dear Janet,

I think we need to look at what is best for you, first.

You’ve obviously ready to file for bankruptcy. You have the counseling certificate in hand.

It is a bit of a double edged sword here. If all of your creditors are willing to reduce your debt and give you monthly payments you can afford, then that might be a good way to go. Be sure you get the offers in writing from all of your creditors before you start making any payments. I’ve seen creditors say one thing and then deny they ever made the promise latter on. It is important that all must agree in advance before you embark on a multi-year repayment plan.

However, on the other side, your credit is already or will be shot even with the settlements so bankruptcy isn’t a big huge problem. They both hurt your credit report. But here is the ironic thing. If you make payments it can take years and you run the risk of a creditor not honoring the promise they made to now.

If you go bankrupt you get a shot at a fresh start, you get to start saving money again to protect yourself from future misfortunes and you get to close the door and silence the debt collectors forever on your current debts. Even if you go bankrupt you can still repay your creditors if you feel you must.

My best advice is for you to listen to your heart and follow the path that is going to be less stressful for you moving forward. Life and this economy is tough enough without adding all the pain and suffering of debt problems on top of that.

I’m sending you an extra big hug.

Let me know what you decide to do.

Steve