Is bankruptcy a good option if I'm deep in debt? Or is credit counseling a better option?

Question

I Owe roughly $30k in credit card debt and I'm not sure which path to take.

Answer 1

Like mpb says, bankruptcy will mess with your life in unexpected ways. And they recently changed the regulations on it, so it's a lot tougher than it was just a few years ago.

It is in NO WAY at all an easy way out, if you file you'll probably regret it and wish that you had just tried to get counseling, learned how to control your spending, and paid it off the old fashioned way.

Answer 2

Either way, credit counseling is a good first step. A credit counselor can help you evaluate your financial and credit situation. From there, they can help you determine whether a debt management plan, bankruptcy or a self-guided strategy is best.

Credit counseling is not an automatic debt management plan. If the agency you contact is only interested in selling a DMP, then go somewhere else. Reputable credit counseling organizations will help you evaluate your options and allow you to choose your best option.

Both self-directed strategies and debt management plans could be capable of reducing your interest rates enough to allow for a much lower payment on your credit card accounts. These would also put you in a much better situation than bankruptcy. However, if bankruptcy is the best option, then a credit counselor can answer questions about that too.

Answer 3

Credit bureaus look at credit counseling as one step away from bankruptcy, so either way, it will have a negative impact on your credit score.

Most credit card companies will only reduce your interest rate if you have good payment history (i.e., no lates, or late payments no earlier than a year ago, and sometimes they'll deny you if your balance is too close to your credit limit).

If you do go the credit counseling route I would research them on the Better Business Bureau website (www.bbb.org). You can look up the company via phone number, website address, or mailing address. It'll give you a better idea of whether the counseling agency is legit. I was scammed by one company and wish I would have done a little more research first.

BOTTOM LINE: Do NOT agree to pay the counseling agency ANY money until you see the results of the negotiations. Also, make sure to ask what the fee is, whether it's a one time upfront fee, or a monthly maintenance fee. I signed up with a so-called "non-profit" agency and turns out they charge a $35 monthly "maitenance fee". I really didn't need credit counseling as I could make my payments on time but I didn't think it through and just wanted to consolidate all my payments. Looking back, I should've just been more disciplined and had a schedule for paying my bills, as I do now.

Hope this helps.

Answer 4

$30K isn't really all that much, and it is not worth trying to file bankruptcy. You don't need one those credit counseling services either. Simply contact the credit card companies and negotiate to get a lower interest rate.

Some people theorize if you have multiple cards, pay the minimum amount due each month on all cards except for one. On that one, focus as much as you can afford in payments until you can get rid of the balance, and then close the card. Repeat the cycle with the other cards until they are all paid off. Close them when you can, but don't close them all. Don't expect to have the credit cards paid off over night either. You didn't accrue the debt overnight, so you're not going to get rid of it in an instant.

The one thing you need to learn is how to live within your means, and stop charging on your cards. If you do the math, sometimes you are paying triple for what you charged.

Answer 5

Start by looking around a good credit counseling company, and not become a victim of one of the various credit counseling scams that are prevalent today. Do not be misled by any ad that assures you quick fixes for your credit report. This is an impossible promise. Instead search for a honest company accredited to Consumer Credit Counseling Services.
Then fix a meeting with a professional credit counselor, and apprise them about your debt situation. Do not omit anything as they will require the entire information to draw up re-payment plan according to your situation.

Answer 6

Bankruptcy only gets rid of your current debt. Unless you change the BEHAVIOR that created the debt, you will be in the same position again in 5 to 10 years. A GOOD counselor will help you fix your behavior. I think the latest bankruptcy law require credit counseling in any case.

Answer 7

Debt has become inherent part of our modern day lifestyle. Today the debt is spiraling out of control. This started when the credit card companies first began providing credit and many were enamored with the idea. However very quickly, many realized that the situation was not as glamorous as they thought, when they saw the rising number of the fees, penalties, and false charges. If you are not completely careful about the contents on your monthly statements, it is quite likely that you are paying for those items about which you are totally unaware. But now there is a way out. You can get help from many companies who aid the customer to retaliate.


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Answer 8

Try the credit counseling first. I filed Chapter 7 bankruptcy years ago - it IS a big deal and devastating to your life. It doesn't JUST ruin your credit - ruins your ability to get employment in some places, ruins your ability to get into decent housing.... I don't even think Chapter 7 is available anymore (wipes out all of your debt - poof). I think now the court requires Chapter 13 where you work out a way to make payments to the creditors. Good luck to you.

Answer 9

Well you need credit couseling just because you ran up that much credit card debt. If you have other assets you will risk them through bankruptcy so I can't tell your best option. If you have other assets, credit counesling generally will allow them to negotiate on your behalf for reduction in rates so it can be good. However there are lots of scams in this area so be careful.

Answer 10

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