Credit Score of 531 – Delinquent Accounts – $25,000 unsecured debt – $12,000 Student Loans – Bankruptcy?

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I haven’t been able to pay on anything for about 9 months so my credit plummeted. However I did pay on time for 8 years straight before I lost my job and couldn’t pay for those 9 months. Now I have a new job and I will be grossing about $ 28,000. Should I declare bankruptcy to get rid of my $ 25,000 credit card debt and then try to build my credit back up by paying my student loans on time (I am still in the grace period on them right now)? Or should I try to pay the $ 25,000. Which would be better or my credit in the long term? I’m still young (mid-20’s) so I wouldn’t be looking to get a mortgage or anything for 10 years or so anyway.

  1. Reply
    May 17, 2011 at 3:52 am

    If you arent looking at any major purchases in the next several years, a BK will probably leave you in better financial shape then struggling to pay off a credit card debt that you could be paying for the next 10 years. Your credit will recover from a BK, and you will have an easier go of it if you do it that way, it sounds like.

  2. Reply
    McCain Sit Down!
    May 17, 2011 at 3:57 am

    If you want to buy a home or car anytime within the next 7-10 years, bankrupcy is going to cost you big time.

    Someone with a bankrupt FICO score (which would be you) is going to get stuck with a higher interest rate.

    The extra costs you face after bankrupcy will exceed the amount of the money you owe today!

    I recommend you try and pay off the $ 25,000 unsecured debt. Work with legit debt councelors that are recommended by the National Foundation for Credit Counceling ( or 1-800-388-2227)

    with them, you will lay out your financial situation and if they think that you can dig out your debt within five years, they will sign you up for a repayment plan (which I think will suit you). All your debts will be gathered together and you will make one single payment to the couceling agency who will then work with the creditor(s) to get your debt repaid. these credit couselors will negotiate deals on your behalf where either part of your debt is forgiven or your interest rate is reduced! you might have to pay a monthly fee but it won’t be more than $ 25 a month. Good Luck!

    National Foundation for Credit Counceling ( or 1-800-388-2227)

  3. Reply
    May 17, 2011 at 4:32 am

    You did ask this question already but did add some Additional important details in your income and debts. You may already know this but Student loans are not dischargable in Bankruptcy so it would only be for your Credit Card debts.

    In order to declare a Chapter 7 Bankruptcy you first have to pass two means tests. The first is if you earn more than the average for your state. The second is if it is determined if you have at least $ 100 a month disposable income for the next 3-5 years. If you do you may be forced into a Chapter 13 which is known as a Wage Earners plan.

    While you do need to talk to a lawyer about the specifics of your case it sounds like you may be moved into a Chapter 13 if you are approved for one at all. If you are put into a Chapter 13 they will require you to make monthly payments toward your debt, then after 3-5 years any remaining debt would be discharged and you would no longer owe.

    You may be better off trying to get onto a Debt Management Program. These are companies that work with your credit cards to lower the interest rate and get the debt paid off without going into bankruptcy. There are several out there and you need to be sure that you do not get involved with a Debt Settlement Company, these are very different and will cause more harm to your credit than help. For a DMP you can look at the National Foundation for Credit Counselors site for information

  4. Reply
    May 17, 2011 at 4:55 am

    Life events can unexpectedly happen to any one. The question is how you can get control of your life.

    Declaring Bankrutpcy should be your last option as it would hurt your credit score and will be on your file for 7 years. No one will lend to you in this time period and if they do, you’ll pay exorbitant rates. At some point, you will be planning to buy a car or a house and it’ll hurt you tremendously then.

    You should call one of the non profit credit counseling agencies who will help you work with your creditors on a payment plan at reduced rates. Look up or

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