When you Come to the End of a Road – Considering Personal Bankruptcy

There are lots of options to avoid bankruptcy, and you need to really consider them before you take this road. For one thing,it is expensive if you are strapped for cash already.  A typical Chapter 13 bankruptcy costs about 4000-5ooo depending on the state, although most of the lawyers costs are wrapped into the payment plan.  In my case, I had to come up with $100 to retain the lawyer no matter which bankruptcy I decided to take. I was initially considering a chapter 7 bankruptcy, because it was over sooner and did not involve a  payment plan  to have to deal with every month. However, I decided to go with a Chapter 13, also called a “wage earner’s bankruptcy”  because if I was afraid that since I was back to work I  would not qualify for a chapter 7. There was more to it than that – since I was behind on my mortgage,  (and car payment) at the end of the chapter 7  I would have to deal with Bank Of America again and try to negotiate the debt.  I could not deal with the thought of  going through out this and still having to call creditors, I am ready to have the court make the decision and go on with my life. I will try to do the best I can to make those payments, but I am done with arguing. I am ready to throw myself on the mercy of the court.

In my case it appears that the past tax payments I owe, the car arrears, the mortgage arrears will be in a payment that I can afford. My credit will be challenged,  but it was going to be anyway.

When you make the decision for bankruptcy I cannot promise you that it will be an easy one.  And actually I think that it should not be. In an ideal world we would pay off our debts each month, or better yet have six month income saved in case of difficulty. But sometimes we cannot do that. Sometimes life plays unfairly with illness and divorce, and sometimes our habits are bad, and that causes the mess we are in.  Usually it is a little bit of both. And I do believe our creditors play unfairly – 30% interest on top of late fees? wish I could get that on any investment that I have.

But when it is all said and done, if bankruptcy is the option to take, I feel that we are lucky to live in a country where bankruptcy is available. What is the alternative – debtor’s prison?