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If you cannot afford the minimum payments, then you must
consider Chapter 7 bankruptcy. If you can afford
the minimum payment only, but you still need to
use the cards before the end of the month for
reasonable and necessary expenses, then you must
consider credit counseling or bankruptcy -- Chapter
7 or Chapter 13.
If you can afford the minimum payment plus 3 percent to 5 percent more, but you still end up using the cards by the end of the month, then you can look into credit counseling or bankruptcy -- Chapter 7 or Chapter 13.
Do not kid yourself. You need to see a true picture of your financial situation or else you will waste thousands of dollars, only to find yourself in the same position years later. Once you complete this basic test, look into these options prior to filing bankruptcy:
Call the creditors. Try to negotiate
lower or frozen interest rates. It is worth a
call to see whether the creditor will work with
you. There is no guarantee, and you ought to determine
whether you qualify for bankruptcy prior to calling
the creditors. If you qualify for a Chapter 7,
then the creditor might be willing to work with
you rather than lose the entire balance. Don't
threaten the creditor with bankruptcy, but having
that information will let you know whether the
deal is a viable one.
Credit counseling. Contact a local consumer credit counseling agency and request a consultation. Make sure you do not lowball your monthly expenses just to qualify. You must be able to comfortably afford the monthly payment or else you will only waste money. Do not sign up for credit counseling unless ALL your accounts can be included in the repayment plan. You will find it difficult or impossible to make additional payments outside of the credit counseling plan.
Debt negotiation. This may be impossible in your situation unless you can produce lump sums to pay the accounts immediately. Additionally, creditors might demand 80 percent to 100 percent of the outstanding balance if you have a good paying job and are under age 45.
Debt negotiation companies will state that they can obtain
settlements at 40 percent of the outstanding balance,
but that is only an estimate. It is impossible
to guarantee a low settlement amount, especially
when you are young, college-educated and have
potential to earn a good income. The creditor
may prefer to sue you and get a judgment that
is enforceable for over 30 years. Do not waste
your money unless you can produce significant
lump sums immediately. Stay committed to any decision that you make, MJ. Failing
to act will only prolong your current feelings
of frustration.
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