I Think Chapter 7 Bankruptcy Might Be My Only Recourse. – Steve

“Dear Steve,

I have just under 32 K in cc debt, paid down from a much larger amount. After reading comments on your site I am coming to the conclusion that a Chapter 7 might be my only recourse. I talked to one bank about the debt but all they did was reduce my credit line. I have been unemployed for over a year (or the debt would be gone) and currently get $1800 in unemployment. Single, no dependents, no home, no car payments. I don’t think a credit counseling plan would work after reading at your site. I have made up to $8000 a month in computer contracting work but have no prospects.

In my state chapter 7 allows for emerging with only $700 in cash. I am under the understanding that UI benefits cannot be touched by the bk proceeding, so is it possible to emerge from bk with more than that limit if the income source is UI benefits?


Dear Steve,

Bankruptcy might quite possibly be the best solution in your situation. Making debt payments based on unemployment income is, well, short-sighted.

Unemployment benefits are not for ever even though in this recent economic downturn they have been extended. That is not the norm.

So what is so bad about making debt repayments on unemployment income? The problem is that without any replacement income in sight there will come a day when the unemployment checks will stop arriving. That day will be upon you long before the debt is paid off. So the end result will be that you have reduced your debt slightly but will now facing a huge wall of debt that will be met with bankruptcy anyway.

Unemployment benefits are not designed to make debt payments. They are usually sufficient to properly take care of yourself with food, shelter, and clothing.

As far as specific bankruptcy questions in your state, you are much better off finding a local bankruptcy attorney you like, make an appointment to go in an meet face-to-face to ask all your questions. Most bankruptcy attorneys do not charge for this consultation appointment so the upside is you will get a better idea what bankruptcy will mean for you, for free.

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P.S. Be sure to read ‘The Secret of Surviving Through Difficult Economic Times. What I Learned On My Journey‘.

Damon Day - Pro Debt Coach

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Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.
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