Which is better on my credit rating? Bankruptcy, or negotating with creditors?

Question

I've been laid-off 5 times in the last 7 years due to the economy (my jobs were usually sent to India) and it finally wiped out my finances, savings, retirement, etc. last year. My last layoff was in November of 2005 and I finally just got a new job this month. In 2006, I was looking at filing Chapter 7 (AND I qualified for it according to the attorney).

Before anyone starts thinking I'm some sort of deadbeat who's in way over his head and a crummy worker, I'm not. Every job that laid me off, gave me raises AND promotions prior to the layoffs. I was typically making $70K per year and able to afford ALL of my living expenses and be able to put away savings prior to the layoffs.

So, here's my question:
My new job makes $86K per year now and I CAN afford to start paying my bills again. Should I continue to file bankruptcy on schedule and start a 3 or 5 year repayment plan under Chapter 13, or should I negotiate with my creditors to establish a private payment plan with them?

Some useful notes here...my credit cards are now max'ed out because for the past year I was unable to pay ANYTHING on them. So my point is, if I were to just pick up and start paying as normal now, I wouldn't ever be able to catch up at all...I'm that far behind.

So I really only have these two choices. Negotiate directly with the creditors for a private plan, or filing Chapter 13. What's better for my credit rating?

When I say, "max'ed out" on the credit cards, I mean that they are so far behind that the usual monthly payment of maybe $250...has jumped to where they are demanding close to $2,000 just to get caught up and they've raised interest rates to +30% as well. Even at my current salary, I couldn't possibly pay each creditor that much money.

To Bearded Clam Lover:

Please post your answer here, because there may be others in the same boat who could benefit from your wisdom. Thanks!

Answer 1

Explain what has happened with your creditors. Many will be willing to work with you as they will get their money eventually.
You may find one that will give you a consolidation loan to help you streamline your payments. Most will negotiate a reduced or zero interest for the remainder of your balances.
If you can pay your debts again I would seriously stay away from the idea of bankruptcy. A few late payments of your credit report is one thing, a bankruptcy is another beast altogether.

You may want to find an accountant who can handle your money for you and talk directly to your creditors.

Answer 2

You can find the best solution for you at: SALESQUOTES.INFO-

RE Which is better on my credit rating? Bankruptcy, or negotating with creditors?

I've been laid-off 5 times in the last 7 years due to the economy (my jobs were usually sent to India) and it finally wiped out my finances, savings, retirement, etc. last year. My last layoff was in November of 2005 and I finally just got a new job this month. In 2006, I was looking at filing Chapter 7 (AND I qualified for it according to the attorney).

Before anyone starts thinking I'm some sort of deadbeat who's in way over his head and a crummy worker, I'm not. Every job that laid me off, gave me raises AND promotions prior to the layoffs. I was typically making $70K per year and able to afford ALL of my living expenses and be able to put away savings prior to the layoffs.

So, here's my question:
My new job makes $86K per year now and I CAN afford to start paying my bills again. Should I continue to file bankruptcy on schedule and start a 3 or 5 year repayment plan under Chapter 13, or should I negotiate with my creditors to establish a private payment plan with them?

Answer 3

There's no simple answer to this. Ballpark guesstimate is 4 to 6 years before you can be be considered a good credit risk again. A bankruptcy is a very serious blemish on your credit but it's not the end of the world, it means from here it can only get better. Within 2 years you can be qualified for subprime auto/mortgages, but you can also expect to pay extraordinarily high interest rates, and that's WITH an unblemished credit history since your discharge. Only time will heal your credit. A CC with a low credit limit can only help you as long as you maintian a solid payment history. Even with a bankruptcy creditors can be much more forgiving if have re-established a trend of responsible credit management since then. But be very very careful. Although you do need credit to rebuild your credit, there are less than ethical credit issuers out there who are more than happy to offer you a shiney new credit card. There is a reason for that. It's because as a bankruptcy you are a prime target as someone who they think will go out and rack up massive debts again, except this time you cannot file another discharge. That means you are trapped with massive debt, outrageous interest and late fees, and cannot escape. Use very minimal credit and use it wisely, throw any offers you get in the trash. The rest is simply time. As I said, it will get better and your bankruptcy will be a forgotten chapter (no pun intended) in your life.

Answer 4

Definitely not bankruptcy. Go to a credit counseling service, show them what you've gone through and tell them you want to pay it off. They will get in touch on your behalf with the creditors and streamline your payments so you can actually pay off your debts without running into the problem of high percentages and minimum payment. Look in the yellow pages of your city. They will make you a budget you have to adhere too, therefore there's not much room for party or vacation time, but at least you'll be back on track.

Answer 5

Many people are in a similar situation and it is better not to opt for bankruptcy, some info I found which would help you:

How to Avoid Bankruptcy Explained

With the rising consumerism, aggressive advertising campaigns and increasing incomes, people are living well beyond their means. As a result, they are burdened with heavy debts. If they are unable to repay the dues, they have to file bankruptcy. Bankruptcy is the last resort when you are reeling under financial problems

Answer 6

If you are a serious candidate for either, your credit is already bad. Paying what you owe is always better than not paying. Your credit will recover faster if you live like you were making $50,000 and apply everything else to your debts. You can afford to live better that most people and eliminate your debt in 2 or 3 years. Once you are out of debt, you can pay cash for everything and still live better than most people.

Answer 7

Negotiating with creditors will hurt your credit, but not quite as bad as bankruptcy will. Good luck to you...I've been on the verge of bankruptcy myself, and slowly but surely am starting to be able to breathe again!

Answer 8

Bankruptcy.

Answer 9

Everyone is wrong here.

Email me and I'll explain a correct course of action which is simple, effective and works for the long-term--no bankruptcy or any other nonsense.

I am not selling anything.

Answer 10

if i were you i would try and settle your debts with the companys because filling bankruptcy will take a long time to restablish your credit back and for the first couple years no one will finance you for anything you have a better chance in trying to settle with the companys you are in debt with most of these companys will settle if you offer them a reasonable payoff amount