Dumb Money Move No. 9: Declare bankruptcy so you can start fresh with a clean slate

Borrow from other sources..what an idiot. If you had credit after falling this far down you the last thing you would need to do is borrow more money..another BAD idea..

Dan,

While we agree with your statement that bankruptcy is not a panacea and should be a last resort, you really don't address how people with debt problems can avoid getting sued on their debts if they can't pay -- and ending up with judgments against them -- garnished wages and seized bank account. Bankruptcy is a solution for exactly that problem and should be seriously evaluated as an option by anyone with serious financial problems (along with other non-bankruptcy options). It is certainly a far better option than so called debt-consolidation or debt settlement -- in which creditor participation is entirely voluntary (unlike bankruptcy). Also, many people with debt problems have too much debt to realistically solve their problem in credit counseling.

Finally, there is a lot of misinformation regarding the 2005 amendments to the bankruptcy law. Many people are under the mistaken impression that they are not eligible for chapter 7 (liquidation), when in fact they are. For example, as of the date of this posting, in New York a single person would need to have income above $44,587, 2 family household income above $54,397, 3 family household income above $64,673, and 4 family household would need to have annual income above $77,664 (figures for California are about the same, other parts of the country tend to trend a little lower).

The means test (regarding eligibility for chapter 7) also only applies to debtors with consumer debts. If the reason a debtor needs to file bankruptcy is because he/she incurred business related debt (such as from an investment property) then the means test doesn't even apply.

We are finding that the majority of the clients who contact us for personal bankruptcy are still eligible for chapter 7.

You can find additional information on the Frequently Asked Questions (FAQs) on our website at www.starrandstarr.com and on our Blog at www.starrandstarr.com.

STARR & STARR, PLLC
New York, New York

I would like to add Solin also doesnt address the fact that in debt settlements, the forgiven amount is consonsidered income and is taxable which can result in HUGE income tax hit in the settlement year and in fact can be much bigger than the fileing and court cost for bankrupcy. The flip statment that declaring bankruptcy is a dumb move and then not adequately explain the reprecussions of his so called alternatives is a Dumb Money MOve

I did a settlement with a Bank of America Credit Card. The balance not required to pay (Including Late Fees, Interest of 39%) all concidered Taxable Income by the IRS. What Gives? Whatever Bank of America added on was not received as Income!

My lady friend recently lost part of her income and is not able to make her hous payment, credit card payments and living expenses on what she is currently making. The house is worth $170,000 in the current market, but her loan amount is $210,000 and the bank is starting to forclose after several missed mortgage payments. Her credit card debt is in the $15,000 range after being ripped off by a storm shutter company. Her Florida attorney recommended bankruptcy to solve her problems. She feels obligated to pay her debts so is undecided about this step. Is this a good move or how should she handle it.

I have a small interior decorating business. In operation for 30 years was one double store, which was not doing great. I opened a second store in a 'booming' area, hoping it would help the first store. Exactly the wrong time. I was forced into Chapter 13 Bankruptcy. While counseling, and oversight have been part of this process, I will be forever greatful for the second chance. I am one year into this, and with the huge decline this past year in the housing market in the entire country, but especially in Florida, my doors would be closed. By paying a percentage on my debt, I am still able to pay on two mortgages, make payroll, pay taxes, and generate at least some business for my vendors. I totally believe that it was to every ones benefit to proceed this way. I will be forever greatful to a country who gave me a second chance.

Hey Mr. Expert Talking Head! Why are you perpetuating the myths, hype, and stereotypes the establishment and banking industry tries to brainwash consumers to believe. For 99 of those who believe you, there is 1 who doesn't; that's me! You proffer all these claims and support it with massaged data to fit your claim. Get off your throne and clean the brown off your nose!

From the article: "There are over one billion cards in circulation. Most people pay only a portion of their credit card debt monthly, leaving an average balance of more than $10,000." $10,000??? If this is even close to being true, credit card defaults will be worse than the housing crisis!

hahahaha,ya right think 2wice about it....let them do what ever they want,because when you don't have nothin..they can't get nothin...!

let them go piss in their hat and wear it.

10,000 in CC debt? Are you kidding me? I wish I was JUST in 10,000. I believe more Americans are a lot more debt than they let on. If people are losing homes they'd had to try to save their homes with CC's. I let my CC go to save my home, I'll bad credit but I'll have a roof over my head, which is more important? I'll repair my credit in years to come, right now I need food & lodging, and a job! I would just LOVE to have a JOB!!

All of these offered options are really just ways for scabs to make money. After the bush people redid the bankruptcy rules it really put people in a more hopeless situation then they were before. However all they want to do is try and scrape the bones of the people who are already ruined. What a government we have. And all of these so called experts really need to get off the bandwagon. Its all over for most people.

Go Figure. I just did a chapter 7 (which cost me a total of $1,299) and I did have to have my ducks in a row but I had a great attorney who was there each step of the way. But what I cannot figure out is that banks are already trying to extend me credit. What gives?

I did a chapter 7 a few months ago and it went very smoothly. My total fees were $1,399 and the attorney was great. I had no alternative as I had been thru a bad patch and owed a huge amount of money. What makes me laugh is that now banks are already trying to give me money. What gives?

A friend of mine , kept up with his bills , mortgage , etccc always on time , never late , so far , but he's in a situation where , he's getting laid off , 2 weeks / 3 weeks another month. He's a dependable person . The problem is , the company he works for , lacking in work , he's been looking for another job , everyday for months , sending out resume daily , and no bites from companies. Accepting resumes , not hiring , age discrimination (yes you read that correctly ) . What is a person to do , when you try daily to look for work , when it's not as easy as you think .

Everyday myself I read , hear on tv , companies are laying off , by the thousands , so where are these people going to found a job ?

At this time there's over 7.3 million + , unemployed , last month another 51,000 laid off . Resource from U.S.A Labor Washington D.C.

Everyone has a story and in different situations.

I really feel many of these people Does want to keep up with there bills , but everyday it's overwhelming .

What is wrong with USA ? Companies moving to foreign countries that's one reason why we're in this situation . Nafta should Never of happened. I feel companies are traitors . they should be fined but that wont happen.

For those who can afford paying off your bills , do it , especially your credit cards . Have at least One year of savings . Good luck , you will need it .

It's taking an average of 15 months to found a job many longer ........

I agree with Kaylee ... I WISH I were only $10,000 in credit card debt... I'm on soc. sec. (w/hubby) and I owe $70,000+/- in credit card debt. How in the heck do you live today without the cards to fall back on. I have PERFECT credit but if hubby dies, no way. Oh, and until one of us goes that amount of debt will increse each month. How do you pay for food, pills, THE CREDIT CARDS, etc. when you have to use everything that comes in on rent, horrible utilities, insurance, gasoline, and on and on. Oh, we do have a huge entertainment expense .. we go to the movies now and then ($4.50 each) + 1 cup of coffee at Starbucks .. which is located next to theatre!!!

I'm in a situation where I used my credit cards to start my business,,,business was getting good and I was making huge payments,,all the credit cards did was keep raising my minimum payments,,,One card I was paying 1000.00 a month on a 400.00 minimum,eventually they raised my payment to 900.00 a month and all they could say was they are sorry,,,sorry alright.one card I was paying 800.00 to 1000.00 a month only to see my balance go down 80.00 dollars,,,,I finally put these cards on a credit debt program just to knock the interest rate down. been paying for years and they still seem to be hanging there,,,Bankruptcy is looking pretty good

wmstoup, you JUST filed bankruptcy and are already getting credit card offers b/c you cannot legally file bankruptcy AGAIN for 6 years. They're probably all secured cards too, which means you'll have to pay them up front for the full amount of the credit line. So they HAVE your money already, and charge you interest on what you "borrow" each month.

It's been just over ten years, since I filed Chapter 7. I was over $30,000 in debt... I became disabled in '93 and after a few years of putting EVERTHING on cards, including medical, I was broke (savings and 401k were used up, prior to going on credit). Bankruptcy gave me room to breath, but it hasn't been a joy ride... I had to work my way back up the credit chain, first getting those preditory, high-inerest cards... Now, I have a Discover Card with $4,000 credit! I have a GM Card, but it's in the safe, with a zero-balance. As far as the Discover Card, I pay it off, every month. I don't know where I'd be, without the Chapter 11, but now I'm a responsible user of credit and I never pay any interest charges. Bankruptcy isn't fot every situation, but when you cannot work, have lost it all and sincerely want to be a responsible person, it helps... Life is still filled with many difficult challenges and I am now, better able to address those challenges. When all you can do is to carry the cross of debt, it's impossible to become a valuable person. Everyone is valuable and given the chance, you never know... Two US Presidents filed for bankruptcy, at some point in their life, before becoming President.

I totally agree with Stressed Out!!!! NAFTA should never have happened! I have said that all along when Clinton put that bill into affect, which of course didn't really hit until the Bush term, I guess to make him look bad, I don't know.

One thing I do know is this: Credit cards should have NEVER been invented or developed! Our country should be able to live within our means of income, but we don't because of consumerism and the want, want, want factor. I can understand that sometimes we had to use them to get thru tough times, but to just go out and spend the money on whatever is crazy. We all know now after all these years what the cc companies are doing, ripping us off and punishing us for being a customer.

I personally have over 30 grand in cc debt and cannot pay it because of a back injury. Most of them quit calling me after I explained to them that I fell behind in mortgage payments and our 18 wheeler payment, which is our ONLY income from my husband. I drove myself for 11 years and couldn't take it anymore, then I get a job at home and end up quitting after three days because I was in such pain and standing at only a 45 degree angle. I haven't been able to sleep in my own bed for over 2 years even after three epidural shots, which I had to pay for myself, almost 10 grand there with a loan. It just goes on and on and you know what? Chase Mastercard won't get the picture! They have been calling me everyday 10 times a day and every time they call, I pick up the phone and then hang up. It just doesn't quit! I explained my situation to the other cc companies and they haven't hassled me at all. But I know why Chase does it, because all their customer service is in India and they don't care (another product of NAFTA)! They just do as the computer says and don't put notes on my account about my story. Can I sue them for harrassment? Wish I could! It would cost me too much to do it I suppose.

All I know is that I am sick of it. I had to file for SS disability because of my injury and it was very hard for me to do that. But it's my money and I need it to help me along for however long I need it, that is why we pay into the stupid thing!

So until we teach our children, which I have done with my three stepsons, to NOT get involved with cc debt our country will always have cc's. It's a vicious cycle that needs to be broken otherwise it's going to break this country! We didn't even qualify for the stupid stimulus check because we are a S corp. and we showed a negative 2 grand on our taxes. You have to pay in to get the check. Thanks for nothing!

Well,

What great replies. I say, most card companies are very aggressive and eager to help with convenience checks, cash advances etc...

Even phone calls from teller marketers encouraging you to take on more debt is out of control. They can be very aggressive.

I always ask them "why would you take a job that encourages spending and debt?" But, that is another story.

I personally filed almost eight years ago and it was the best decision I every made. All my money was now mine again and I did not have to pay taxes, no consolidations, no begging to drop interest, no embarrassing situations. I thought and still think it is the best way to start fresh learn from your mistakes.

Do you know how many rich people have filed over the last 100 years...like Donald Trump! I don't see him sweating it and look how he re-grouped and started over. Poor/destitute/middle income families should get the same opportunities as the wealthy.

We make mistakes just like the Trumps', Mark Twain (Samuel Clemens), Thomas Jefferson estate sold off to pay debt. His wine bill was over $10,000.00 in 1809), Willie Nelson and Kim Bassinger.

This is nothing..just look it up "rich and bankrupt".
Dan Solin you should be ashamed of your self...trying to scare these "poor people"