Is Bankruptcy the best choice for an unemployed person with $25K in credit card debt?

Question

I was recently terminated from my job in July and am having difficulty finding a new one, but in the meantime I have about $25K in credit card debt and not able to make payments. A credit counselor suggested bankruptcy, but I know the consequences of such action. However, without a job I have no money and I do plan to get one as soon as possible. So please don't tell me to get a job, I already know that and doing everything I can by applying for many different positions. But given my current situation, is bankruptcy my only choice and is it better to do when you are unemployed or have a job? I have also already tried to contact the creditors to negotiate the terms, but no luck since my credit is in such bad shape. Any suggestions?

I forgot to add something...will filing bankruptcy hurt my chances of getting hired for another job?

Answer 1

Go to this site: http://www.nfcc.org/ They are Consumer Credit Counseling Service (CCCS), a legit non-profit company. They offer free credit counseling and have a debt management program available, if you qualify, for no fee.

They can look at all you debts and advise you how to proceed.

If you have $25K in credit card debt, you didn't run that up in just the past couple months. You have a real problem living beyond your means. If you had managed your finances better, losing your job would not have put you on the verge of bankruptcy in two short months.

Answer 2

You should take a look at the options you can find at: MYLOANSRATES.NET-

RE Is Bankruptcy the best choice for an unemployed person with $25K in credit card debt?

I was recently terminated from my job in July and am having difficulty finding a new one, but in the meantime I have about $25K in credit card debt and not able to make payments. A credit counselor suggested bankruptcy, but I know the consequences of such action. However, without a job I have no money and I do plan to get one as soon as possible. So please don't tell me to get a job, I already know that and doing everything I can by applying for many different positions. But given my current situation, is bankruptcy my only choice and is it better to do when you are unemployed or have a job? I have also already tried to contact the creditors to negotiate the terms, but no luck since my credit is in such bad shape. Any suggestions?

Answer 3

It sounds like your having a really tough time. So Sorry. Filing for bankrupcy will relieve you from paying for the debt, however it will be detrimental to your future. Depending on what type of industry you are in bankrupcy can affect your hiring status. Some companies do pull your credit report to see how you handle your personal finances and feel if you are responsible with your personal finances, it can mean you are responsible at work. I disagree with this practice, but it does happen. If you file bankrupt it will follow you for 5-7 yrs before you can recover and use your credit again. It doesn't really fix things, just gets monkey off your back for a while. Just pay what you can even if it's below the minimum until you ride out the storm and get your next position. Make sure you pay consistenly every month. when all this is over and you begin making minimum payments on time every month you can write a letter on your own behalf to the credit bureu stating that you were having a difficult time due to job loss. This will show up on your report then people can see why you had slow payments. Slow payments eventually go away from your credit. Bankrupcy will follow you much longer.

Answer 4

Bankruptcy should be used only as a last resort, as the ramifications last well beyond 7 years (10 years on file with on credit reports.) The best solution when you're behind on your debts is to keep in communication with your creditors. If you are determined you know that eventually you will find employment again and you will be able to start paying back your creditors. Many times it takes several calls to your creditors to work out a favorable solution, so don't give up after the first call to customer service or collections dept. say's No, speak with a supervisor, someone who has authority to work out a favorable solution towards a payment plan. Remember, as long as you make a payment even below your minimum amount due they will continue to work with you. Repairing your credit after going late or even to collection status is far easier to repair than explaining why you file bankruptcy to lender say 4 to 5 years down the road when you're ready to make a purchase say on a home or a new car. Typically late payments, paid collections or settled accounts 12-24months down the road won't affect your credit score as much as having a bankruptcy that is 3 years old. Keep also in mind that it's much harder to re-establish credit after a bankruptcy with out a secured credit card starting out because your credit history shows that when things got rough for 60-90 days, etc. you gave up and basically told everyone that you owed money to pound sand. However, by paying on your creditors even when things got rough, even once every other month until you started working again and could start making regular payments on time will show that you take your obligations seriously. I speak from personal experience here and also having spent 15 years + in finance. Tough it out, because once you hit bottom there is no where to go but UP! Hang in there and keep looking for work you'll find it. In the mean time also look at filing for unemployment benefits, it may not be a lot of money but at least it's something. Good Luck on your job search.

Answer 5

I think it is usually better not to do bankruptcy, which will harm your credit report worse than mere charge-offs and collections will. But of course it depends on a lot of factors. You could also consider credit counseling. Your creditors can take you to court and sue you to get a judgment. The judgment MIGHT lead to garnishment of wages or a lien on your house, or access to your checking account. Note that those options are pretty limited -- bankruptcy is primarily a means to protect your assets from creditors -- usually not needed for unsecured debt. Note that your situation with credit cards is way different than the guy above who had medical bills. Different laws apply. I very much doubt anything as draconian would happen to you. And you don't get arrested for not showing up in court. You just lose default judgment. More likely, they will never take the step of suing -- that takes time, money and effort. But no guarantees. Your state has a statute of limitations, after which creditors cannot successfully sue you (varies, usually about 3 - 6 years). You should research that, and what triggers the "clock" and what if anything can restart the clock in your state. Some people just wait it out til SOL expires, then take action to clear up their credit reports.

Answer 6

Bankruptcy is your best choice, specifically Chapter 7. This will wipe out most of your consumer debts, and you'll be able to re-establish good credit within 2 years after your discharge. You should be able to get a credit card with only an annual fee within months of your discharge. Your credit score depends mostly on the past 2 years of your financial history, with more recent items having more weight. It makes no difference if you are employed or unemployed. However, if you are unemployed, you can apply to have the bankruptcy fee of $299 waived.
Bankruptcy will not hurt your prospects for a job unless it is an important job that involves handling money, or pays more than $75,000 per year. However, bad credit will hurt your prospects for these jobs, also.
I would like to point out, also, in response to 1 of the above answers, that paying something toward your bills will not protect you from lawsuits unless the creditors agree to it, which isn't likely. However, bankruptcy will protect you from lawsuits.

Answer 7

I would file for bankruptcy. Your credit is blown anyway, and it is a fallacy that you can never get a loan after bankruptcy. You can re-establish your credit, but it's going to take some time either way. I personally think that the credit card companies are predatory lenders. They deliberately extend credit to people who are high risk in order to reap the reward of late fees and interest payments for years on end. The interest rates that credit cards charge are higher than the rates the Chicago mob bosses charged. Usury laws were established to prevent the mob from doing this, but the big corporations get away with it. File for bankruptcy. It will cost you a couple grand to the lawyer, but then you won't have to look back or deal with harrassment. You'll be debt free (unless you keep a mortgage or a vehicle), but this gives you a good opportunity to re-start your life with sounder financial habits. Good luck. Employment and debt issues are second only to health problems in terms of stress. Stay cool.

Those credit agencies can arrange payment options for you with lower interest rates, but you'll still be paying for years to come. Some people feel a moral obligation to re-pay what was loaned to them, but I have so little respect for the business practices of these lenders that I wouldn't worry about that. You have to focus on what's best for you and your financial security.

Gather all your bills and go see a bankruptcy attorney. Listen to what he/she tells you. You can always elect not to file, but get some information so you can make a wise decision.

Answer 8

I've never heard of a credit counselor telling anyone to go for broke. Bankruptsy is what they try to keep you from going through. Have you tried any of the credit counselors that actually work with your credit companies to pull you out of debt by pooling all your credit cards into one payment? They work with those companies to lower all your interest payments and even some of the premiums. I suggest you try one of those. We got completely out of debt that way oursleves several years ago. I know that there are even Christian based ones out there. The only one that's name comes off the top of my head right now is 'Credit Counselors of America' but you see the ad's for them all the time on TV. If one won't help you, don't dispair, go to another one until someone does. Read the information below from the Federal Trade Commission on how to pick a good company. Also the other site is one is the government list that lists approved credit companies according to state.

One thing, until you get a company, here is something that can help you keep from any law suits: As long as you are paying something to any company per month, even it is just a few dollars, they cannot prosecute you. It shows good intentions. Good luck.

Answer 9

To answer your additional question, filing bankruptcy can affect your getting hired for another job. Just depends on how thorough the company doing the hiring is. I know that I went thru a credit check, background check (they looked for criminal events and verified college degree) and drug screening for the job I took. However it was for a Fortune 500 company. Smaller companies or companies that hire quite a few workers might not be as thorough.

I hear Bank background checks are even more thorough.

Answer 10

Well it could be an option however there will be a charge of £485 - £150 court fee and £335 ORs deposit.
maybe you should consider different methods such as an IVA or a composition order with creditors??
Most people that do go bankrupt have debts of £12000 or more however you must take into account if you own your house or a car you will lose it. any questions let me know,