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  1. #1
    Join Date
    Mar 2005
    Location
    MI
    Posts
    4

    Default Should I file for bankruptcy?

    Hello, I've been stuck in debt for a few months now..I'm about 20k in the hole..and I'm really considering whether or not I should just file bankruptcy. I'm a student and it will take me a while to pay if off..with the interest rates and all. i joined a debt management program a few months ago...but I'm thinking maybe i should just file bankuptcy instead. Can anyone tell me what's my best option?

    I'm a student; 22 years old..I have a couple of student loans (not much abour 4k)

    I have a personal loan at a bank..i have a checking and savings there along with an IRA I just opened. I owe about 3,500 on that.

    The rest are credit card debt. What kind of bankruptcy should I file?? Should I even file bankrupty?? Thanks so much!!

  2. #2
    Join Date
    Mar 2005
    Location
    Michigan
    Posts
    28,906

    Default Bankruptcy

    Congress passed significant changes to the bankruptcy code recently, which become effective in October. If you are considering bankruptcy, and think you might be eligible for a Chapter 7 discharge, you should consult a bankruptcy lawyer ASAP as if your case is still pending when the changes become effective you may be precluded from seeking Chapter 7 relief. It is difficult to assess whether you would be better off continuing with debt management or pursuing bankruptcy - that's something you should discuss with a bankruptcy lawyer, based upon an assessment of your financial situation and the nature of your debts.

    Student loans are not ordinarily dischargeable in bankruptcy.

    A big part of the question turns on your job prospects. If you are about to graduate and will be making a decent income in your job, you may find that your debt is manageable. If not, you may find that it interferes with your ability to make ends meet during the remainder of your education.

  3. #3
    Join Date
    Mar 2005
    Location
    MI
    Posts
    4

    Default

    Hi aaron thanks for your reply,

    Can you tell me what changes did congress pass? A friend told me it's harder to file for bankruptcy now...but she didnt remember why and any specifics.

    You know I dont know much about bankruptcy at all...I understand a little bit of chapter 7...but i wonder if thats the best option for me.

    I dont know if I want to call a bankruptcy lawyer or not at this point. I want to be sure that I will go through with it before calling. Anyway, if i filed for chapter 7, how long will that set me back?

    Thanks

  4. #4
    Join Date
    Mar 2005
    Location
    Michigan
    Posts
    28,906

    Default

    Quote Quoting hope27
    Can you tell me what changes did congress pass? A friend told me it's harder to file for bankruptcy now...but she didnt remember why and any specifics.
    The article on Chapter 7 bankruptcy describes the changes.

    Quote Quoting hope27
    You know I dont know much about bankruptcy at all...I understand a little bit of chapter 7...but i wonder if thats the best option for me.
    Perhaps this article, an introduction to bankruptcy, will help. It explains both Chapter 7 and Chapter 13 bankruptcy.

    Quote Quoting hope27
    I dont know if I want to call a bankruptcy lawyer or not at this point. I want to be sure that I will go through with it before calling. Anyway, if i filed for chapter 7, how long will that set me back?
    You mean, how long will it be on your credit report? Probably ten years.

  5. #5
    Join Date
    Jul 2005
    Location
    Wilson, North Carolina
    Posts
    3

    Default

    I am 31 years old and I went bankrupt 8 years ago and did a Chapter 7 (jointly with my ex-husband) on about $70k and I still regret it. I could not even rent an apartment without a co-signer (my parents). I know now you are probably thinking that you don't need any more credit if you can just get rid of these bills, but trust me sometime down the road you will need your credit.

    When there is a bankruptcy on your credit you get the absolute worst interest rates if you can get any credit at all. When I needed a vehicle, even from the "We accept anybody", "No credit, no problem, bad credit no problem" dealerships they did not want to finance me without a co-signer and I paid in excess of 18% on a vehicle loan it was crazy!!! The credit card companies can charge upwards of 23-29% when this is on your credit, and get this, if this doesn't beat all, my bankruptcy is still on my credit report even after 8 years and NO LATE PAYMENTS IN EIGHT YEARS.

    I would personally advise you to please avoid this at all costs. try to work something out with your creditors, see if maybe some family members can help a little. try to hold out until you get a good job and then make chunk payments. Take the highest interest rate and send as much as you can to it. Also look on all your statements to see what your finance charges are compared to your minimum payment. Some places will charge more in finance charges than they will the minimum payment which will just dig you into deeper debt even though you are not spending more. So try to send at least a little more than your finance charges.

    And if your loan and credit card interest rates are higher than the interest rate in your IRA or your savings account then you are losing money faster than your making it and it would be better spent to pay down the debt than to earn a small interest rate that is not currently helping you. Maybe you can take a little of the money from your savings account to help you through this tough time. But, I mean, you can do what you want with your money. It would just be so much better for you financially to try to make it through this, especially since you said you've been in trouble for only a couple months.

    Also, check your credit report ASAP, because some debt management companies report to the credit reporting agencies that you are in a debt reduction program and this does not look good on your credit report either. No matter what, you should see your credit report and FICO score. If your score is over 720 you are in good shape and you really don't want to ruin that.

    I remember being in my early twenties thinking this was such an easy solution and that I had to do it or I wouldn't make it. My parents tried to warn me, but I wouldn't listen. I thought I knew better, but it screwed up a lot of opportunities for me. Even employers can see that on your credit report and decide not to hire you based on it. And don't forget it will cost you between $500-$1,000 just to get it done by a lawyer depending on who does it. I do sincerely hope this helps you to make an informed decision.

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