i have 20,000 dollars in credit card debt at the age of 25. should i get a loan to pay them off, or bankrupt

Question

my father-in-law will get us a loan for our debt, but would it be better to just go bankrupt?
i just built my house two years ago, its paid for( all $89,000). so do i really even need credit now? thats what most people work for their whole lives is to own a house.

Answer 1

As a former financial counselor I was suprised by the answers you are getting in regards to your question. $20,000 in high interest credit card debt is quite a burden, but the advice of taking out a line of equity against your house is the last thing you would want to do. Right now your credit cards are unsecured loans. In other words you don't have any property attached to the loans. If you default on your credit cards, they begin collection processes by selling the accounts to various collection agencies, in the hopes of trying to recover at least some of the debt. By getting a line of equity against your house, *POOF* you just got a nice big secured loan against your house. A secured loan means that now if you default they can attach a lien to your property or even worse foreclose on your property if the loan is large enough. This is the last thing you want to do.

Mortgages are usually the part of the monthly bills that takes the biggest chunk, so you are definitely ahead of the game by having your home fully paid for. You get a thumbs up for that! So that should free up a large portion of your income to go towards other bills beyond necessities. I would recommend calling a credit counselor at a non-profit credit counseling company in order to improve your situation. In fact a year or so back, when you heard all that news about the changing rules of Bankruptcy filings, one of the big changes was that individuals were to try to appease their debts through debt consolidation counseling before they were allowed to file, so even if you do file for bankruptcy, you may have to get financial counseling anyways! I also have a confession to make....I am currently on the program myself, and it has helped me tremendously. Here's the basics on how these programs work:
1) You have lots of high interest debt. Perhaps you fell behind on some credit cards or private loans, and the late fees and high interest rates are making it very difficult for you to make any progress. With my case, I was always on time, but I wanted to make a change in my life and rid myself of my high interest debt.
2) you call a credit couneling company. I can't speak for all companies, but at the one I worked for we were trained to counsel the clients. To show care and compassion because they were in some difficult situations. This is sometimes all someone needs. Someone to just listen to, but if the counselor finds that a debt consolidation WILL help, then they will walk you step by step through the program.
3) Okay so you qualify now what? You enroll your high interest debt into the program and the company will begin contacting your creditors to negotiate lower interest rates on most of your accounts. This is a tremendous help because interest consumes most of your monthly payment anyways. Another important thing that you have to remember is that the creditors also CLOSE your accounts. This is to further help you along in paying off your debts.
4) You stay in contact with your consolidation company and creditors. But you only make ONE payment to the consolidation company, who in turn forward it to your creditors.
5) Sit back and watch your debt slowly disappear!

In my opinion, bankruptcy IS a last resort. Depending on the type of bankruptcy you may be forced into a restructured repayment plan regardless. My advice is to just call a counselor and see what they can do to help.

So if you are interested in the company I worked for, it is http://www.incharge.org . If you are interested in the company I have an account with, it is http://www.careonecredit.org/ . Both of these companies are registered with the BBB and have outstanding reputations. The good part is they are also non-profit. They do ask for a monthly donation with your payment, which goes to paying for the counselor's salaries, but you can always decline it if you are really in a bind. I pay it greatfully because they have helped me so much. Anyways, good luck with your research!

Answer 2

Take out a loan against your house - interest rates are still pretty low, so you should be able to get a decent rate. The bank will probably want to send checks directly to your creditors to make sure the accounts really do get paid off.

Yes, you will be moving your debt from unsecured to secured, but the interest you pay will be tax-deductible (unlike credit card debt) and you can generally pay more than the minimum without penalty to pay it off faster (nake sure there is no prepayment penalty).

Don't try to get out of the debt by settling with the credit card issuers for pennies on the dollar. You got into the mess, the responsible, mature, adult thing is to get yourself out, not weasel out.

Bankruptcy is definitely a last resort, and not very likely, based on your free & clear home.

No one ever really needs good credit, even to buy a house. If you have a lot of money in savings (over $10K), any bank will be happy to lend you money.

Answer 3

Well, there are many factors to consider. First of all, how much is your total debt? Second, what are your interest rates? If you have a manageable amount of debt and are able to obtain a loan at a lower interest rate then it may be advisable. However, ensure you pay the cards off immediately but do not close the accounts (and refrain from using them as well or you will defeat the purpose!)

Answer 4

Go to your father in law, get the debt paid off and get rid of the credit cards. If you go to bankrupt, they will take your house to pay off the debt. Not a good move. My motto ' If I can't pay cash, then I either don't need it or can't afford it. It is not meant for me to have.' Get the credit card payed off and don't use them any more. Put your self on a budget and live with in your means of what you earn.

Answer 5

Can you get a home equity loan and pay your CC? The loan may be a lower interest rate but watch out for extra fees. If not, do you have a credit union.. they usually give low interest personal loans.

Good luck.. not familiar with bankruptcy.

Answer 6

Bankruptcy should be used as LAST RESORT - NO EXCEPTIONS!! It is a horrible process and ruins your credit score for years to come. It takes about 7 years to get bankruptcy off your records. Either work with your father-in-law or get a home equity loan on your house for $20k and pay it off with that 7.5% or so interest rate.

Answer 7

Why go to your father in law? If your house is paid for get a home equity loan. It is not whether or not you need credit, but the fact that you charged all that crap and need to pay for it. If not, you might as well call yourself a thief.

Answer 8

The collection agency will seize your house. It will be on your credit report and especially if you go bankrupt. I don't even know if you can go bankrupt if you own a home.

Answer 9

Sell your house and pay off your credit cards and start over with-out your credit cards, no really ,borrow the $20,000.00 and meet your responsibilities . If someone owed you $20,000.00 you'd want them to pay you wouldn't you?

Answer 10

with that amount of equity in your home BK is not an option any judge will allow! get a mortgage to pay the debt