Question: I am currently 30 years old and a stay at home mom with 1 kid and 1 on the way. I do not own anything in my name. I plan on going back to work next year by March 2010. I had a credit score of 700 about 3 years ago. I lost my job about a year ago and racked up about $14K in credit card and medical bills. My credit score is probably not that great anymore. My boyfriend does not make enough money to pay the credit cards any longer. We were going to start next month and NOT pay them at all. We were paying the minimums before but need the money to eat and feed the kids now. We are thinking about filing bankruptcy but not sure if it's the way to go. Here are my questions: 1) Do you think BK is the way to go? 2) Will the stores come and take my belongings if I file for BK (such as the television)? 3) Is it better to file for BK after filing for tax return? (So they don't take the refund) 4) Will it be a problem trying to find a job in the accounting/finance field if I file for BK? (As some companies may do credit checks.) 5) Do you think I should talk to the credit card companies before I go filing for BK? I doubt they would really help me though.
Answer: Wow....I'm so sorry to hear about your situation. You're in a tough position right now.
The first thing that stands out for me is that you want to get a job back in the accounting/finance field because, you're right, more likely than not, they're going to want to pull your credit. That is going to make it really difficult for you to get a job in that field.
The second issue is the fact that you're only $14K in debt. Yes, it's a lot, but as far as bankruptcy goes, it's not that much to eliminate considering the fact that you'll no longer have credit for at least 2 years, unless you re-affirm something like a car; and the BK is going to stay on your credit for 10 years. That's going to hurt you for a really long time considering your occupation.
I really think you should contact a Consumer Credit Counseling company prior to making this decision. Make sure it's a non-profit company and they shouldn't charge you for their service.
They'll help you set up a budget and work with your creditors to stop the interest that is accumulating, possibly work out a settlement amount to reduce the principal, and reduce your minimum payments even further. You make one payment to the CCC and they disburse until the debts are paid off.
This process usually takes about 3 years until all debts are paid. If you go this route, you're showing that you're taking responsibility for the debts you incurred. One note of caution, the CCC needs to come to an agreement with your creditors that they will not report your account as being late while you are making "less than contractual payments". Make sure they get this in writing, so you are sure to preserve your credit rating.
You also need to be sure to continue making your monthly payments until all arrangements have been made with CCC and your creditors. This way there will be no gap in payments being made, hence no lates showing up on your credit report.
If you do file BK, you asked about the stores taking back your things. I really don't think this is a common occurrence, but the creditor will be notified of the BK filing and they can choose to come to court and plead their side of the case. It will be up to the judge to decide what is going to be done. If you just bought something within the last 3-6 months of filing BK, I'd be a little concerned, especially if it's a big ticket item.
I don't think you have to talk to your creditors if you're going to file BK. They'll just try to talk you into payment arrangements and for that you're better off going thru CCC who is experienced in negotiating with creditors.
As far as your tax refund, you'd need to talk to your attorney if you decide to file, and yes, you will have to get an attorney and probably pay around $2500 for the service.
For more information on what to do if you find yourself in this situation, visit: www.RepairCreditTrauma.com
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