bankruptcy or settling on bad debt charge-offs?
Question: Which is more damaging to ones character: Filing for bankruptcy after several bad debt charge-offs; or settling on the bad debt charge-offs and not filing for bankruptcy. Which one is perceived as more responsible? Seems to me that not filing for bankruptcy leaves the door open to be accused of being a deadbeat while filing for bankruptcy appears as if circumstances were beyond my control. What are your thoughts? Thanks!
Answer: Here in the US, once your bankruptcy is discharged, you are deluged with pre-approved credit cards, can get a car loan immediately (albeit at a high interest rate), and most people can get mortgage loans in 2 years or sooner. I disagree completely.
Lenders of today, unlike those of past years, don’t care that you are making the effort to pay your debts. They make lending decisions based on computer models and credit scores, and often a human doesn’t even see your application (other than the data entry clerk who types it into the database).
There are several problems with slowly paying off your debts. First, there is a substantial expense in doing so. You could spent tens of thousands of dollars in payments over a number of years, with the interest, late fees, overlimit fees, etc. continuing to accumulate, or file for bankruptcy, pay the creditors nothing, and move on.
Second, your credit rating will stink while you are making these payments, which often takes 3-5 years or longer. During this time, many people won’t be able to qualify for a loan (car, mortgage or other) at *any* interest rate. The impact of a bankruptcy filing diminishes each month after the discharge is entered.
Given a choice of paying a higher interest rate and being able to get a mortgage or car loan for less, or not being able to borrow at all, I think most people would opt for being able to being able to get the loan.
As far as my “telling a complete story” and “advertising for his business,” you might want to look at the archives of this newsgroup (alt.bankruptcy) to see whether I have told posters the “complete story”. My “advertising for the original poster’s business,” as you call it, isn’t too good–I have no idea where he lives, and it’s 25 to 1 against the possibility that he even lives in a state where I’m admitted to practice, even if he decides to file.
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