- Home
- SAVING AND MAKING YOU MONEY
- Should I File For Bankruptcy? Bankruptcy IS the ONLY Option!
- Home
- EVERY DAY LIFE
- Financial Advice
- Should I File For Bankruptcy? Bankruptcy IS the ONLY Option!
Should I File For Bankruptcy? Bankruptcy IS the ONLY Option!
- By Teri Farr
- Published May 27, 2008
- SAVING AND MAKING YOU MONEY , Financial Advice
-
Rating:
Teri Farr
I'm a professional online writer. I make a very good living writing for websites like this one, plus I don't have to punch a clock every morning.
If you like my articles, be sure to come back each week and read my new postings.
Thanks!
View all articles by Teri Farr
First off, I would like you to know that, within the last ten years, many "current" multi-millionaires have filed for bankruptcy like: Donald Trump, Simon Cowell, Toni Braxton, Wayne Newton, Walt Disney, and Larry King just to name a few. All filed for bankruptcy to get rid of their debt, and all are now multi-millionaires again (some are billionaires).
Note: Different states slightly vary. Visit a bankruptcy attorney website for exact amounts and laws.
Chapter 7 Bankruptcy Facts (as of 5/1/08)
- Your unsecured debt, like credit cards, will be eliminated - $0.
- Your non-payroll IRS debt, if filed 3 years ago or later, will be eliminated.
- You can keep a car worth $15,000 or less (if you can still afford current payments).
- You can keep your house if your equity is under $150,000 (if you can still afford current payments).
- You can keep a few thousand dollars worth of household/personal items.
- Filing will reduce your credit score a few hundred points.
- It will stay on your credit report for 10 years.
- It's the best option for most if you're living paycheck to paycheck.
The biggest question is, "How much is you credit score worth to you?" Also, you need to realistically look at your financial goals over the long run.
There Are Millions Of Americans Paying (Wasting) $1,500 A Month On Credit Card Debt
Because of the high interest rate and minimum payments, they'll be paying this amount for 30 YEARS! That's $540,000 in payments over the next 30 years!!! Is your credit score "really" worth $540,000 to you? If you already own a house and car, technically, you don't even need credit anymore. You can put the $1,500 a month you save into the bank and use debit cards.
Millions Of People Won't File For Bankruptcy Because They Want To Be Able To Buy A House
I've heard this many times. I know many people living paycheck to paycheck, they're renting and want to buy a house. They're paying $1,500 a month in credit card debt and are saving $2,000 a year towards finally owning their own home.
Let's look at this over a 5 year span.
If this person doesn't file for bankruptcy:
750 credit score
Has $10,000 down payment for their house.
6% mortgage interest rate.
Must pay mortgage insurance for low down payment.
Still owes $1,500 a month for the next 25 YEARS in credit card debt!!!!
If this person FILES for bankruptcy (and has no late payments on anything after filing):
550 credit score
Has $100,000 down payment for their house.
10% mortgage interest rate (can refinance in a few years for a lower rate)
NO mortgage insurance because of good downpayment (this helps negate the high interest rate)
Owes $0 in credit card debt!
It's almost ludicrous if this person doesn't file for bankruptcy. Also, the credit card companies are changing their scoring systems to give more weight according to the last 6 months, the last year, etc. This means that bankruptcy filers with a 550 credit score could be higher in the future if all payments are made on time after the filing.
It all goes back to that $540,000 you're paying back over 30 years. And if you're paying $1,000 a month in credit card debt, you're paying back $360,000 over the next 30 years. Is a few hundred points on your credit score worth this much money to you? Many people I know never even use their credit score, but they keep paying hundreds of thousands of dollars in credit card debt just to "keep that score up." For what? If you had the $1,500 a month you're paying towards credit cards, you wouldn't even need credit! And if your credit cards are maxed out, you can't use them for anything anyway.
With new bankruptcy laws, there's a means test you have to pass before you can file for Chapter 7 bankruptcy. Basically, if you make too much money, you can't file. Every state has a set amount. It depends on the state and number of dependants you have. Here's a very rough figure just to give you an idea. A couple in Nevada can't make over $26,000 over the past six months. If you make less than this you can file, no questions asked. If you make more, there's a somewhat complicated second part to the test that factors in all your debt.
To the bankruptcy courts, your income is always based on the last six months. If you're part of the group paying $300,000 or more in credit card debt over the next 30 years, if necessary, it may be worth it to have ypur spouse either quit their job or get a lower paying job for a few months to be able to pass the means test and eliminate all of your unsecured debt. Consult an online attorney to discuss your options.
Last but not least, DON'T PROCRASTINATE! Laws change and this bankruptcy law may change again because of the high number of bankruptcy filings. If it does, you could lose your chance and be stuck paying that $1,500 or more a month forever!
Note: Different states slightly vary. Visit a bankruptcy attorney website for exact amounts and laws.
Chapter 7 Bankruptcy Facts (as of 5/1/08)
- Your unsecured debt, like credit cards, will be eliminated - $0.
- Your non-payroll IRS debt, if filed 3 years ago or later, will be eliminated.
- You can keep a car worth $15,000 or less (if you can still afford current payments).
- You can keep your house if your equity is under $150,000 (if you can still afford current payments).
- You can keep a few thousand dollars worth of household/personal items.
- Filing will reduce your credit score a few hundred points.
- It will stay on your credit report for 10 years.
- It's the best option for most if you're living paycheck to paycheck.
The biggest question is, "How much is you credit score worth to you?" Also, you need to realistically look at your financial goals over the long run.
There Are Millions Of Americans Paying (Wasting) $1,500 A Month On Credit Card Debt
Because of the high interest rate and minimum payments, they'll be paying this amount for 30 YEARS! That's $540,000 in payments over the next 30 years!!! Is your credit score "really" worth $540,000 to you? If you already own a house and car, technically, you don't even need credit anymore. You can put the $1,500 a month you save into the bank and use debit cards.
Millions Of People Won't File For Bankruptcy Because They Want To Be Able To Buy A House
I've heard this many times. I know many people living paycheck to paycheck, they're renting and want to buy a house. They're paying $1,500 a month in credit card debt and are saving $2,000 a year towards finally owning their own home.
Let's look at this over a 5 year span.
If this person doesn't file for bankruptcy:
750 credit score
Has $10,000 down payment for their house.
6% mortgage interest rate.
Must pay mortgage insurance for low down payment.
Still owes $1,500 a month for the next 25 YEARS in credit card debt!!!!
If this person FILES for bankruptcy (and has no late payments on anything after filing):
550 credit score
Has $100,000 down payment for their house.
10% mortgage interest rate (can refinance in a few years for a lower rate)
NO mortgage insurance because of good downpayment (this helps negate the high interest rate)
Owes $0 in credit card debt!
It's almost ludicrous if this person doesn't file for bankruptcy. Also, the credit card companies are changing their scoring systems to give more weight according to the last 6 months, the last year, etc. This means that bankruptcy filers with a 550 credit score could be higher in the future if all payments are made on time after the filing.
It all goes back to that $540,000 you're paying back over 30 years. And if you're paying $1,000 a month in credit card debt, you're paying back $360,000 over the next 30 years. Is a few hundred points on your credit score worth this much money to you? Many people I know never even use their credit score, but they keep paying hundreds of thousands of dollars in credit card debt just to "keep that score up." For what? If you had the $1,500 a month you're paying towards credit cards, you wouldn't even need credit! And if your credit cards are maxed out, you can't use them for anything anyway.
With new bankruptcy laws, there's a means test you have to pass before you can file for Chapter 7 bankruptcy. Basically, if you make too much money, you can't file. Every state has a set amount. It depends on the state and number of dependants you have. Here's a very rough figure just to give you an idea. A couple in Nevada can't make over $26,000 over the past six months. If you make less than this you can file, no questions asked. If you make more, there's a somewhat complicated second part to the test that factors in all your debt.
To the bankruptcy courts, your income is always based on the last six months. If you're part of the group paying $300,000 or more in credit card debt over the next 30 years, if necessary, it may be worth it to have ypur spouse either quit their job or get a lower paying job for a few months to be able to pass the means test and eliminate all of your unsecured debt. Consult an online attorney to discuss your options.
Last but not least, DON'T PROCRASTINATE! Laws change and this bankruptcy law may change again because of the high number of bankruptcy filings. If it does, you could lose your chance and be stuck paying that $1,500 or more a month forever!
Spread The Word
1 Response to "Should I File For Bankruptcy? Bankruptcy IS the ONLY Option!"
|
said this on 03 Jun 2008 9:20:58 PM MST
good, informative article. i was a layoff victim from a decent paying magazine job two years ago and although i've worked one full-time and numerous freelance gigs since then, have never fully recovered financially from the layoff. i've considered the bankruptcy route several times to erase debt i had to use to cover my rent, regular bills, car, food, etc. this article provides some more insight into the subject. thanks, dave.
|
Author/Admin)