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I have around 40,000 debt on credit cards plus more debt…

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I have around 40,000 debt...

I have around 40,000 debt on credit cards plus more debt besides my credit cards. I’ve been in debt over a year and my balance has steadily gone up as I haven’t made money or enough to pay them off. I stopped paying the minimum payments on alll cards in November. Currently most all of my cards are closed and going to collections. My credit score went from in the 700s to now in the low 400s. My minimum payments on all my cards now is probably around 3,000$. I found a job back in March but it ended up not working out, now I am at a new job where I make around $130 a day pre tax. Would it be best for me to file bankruptcy or do a debt consolidation loan to pay off all my cards. I have no assets expect a 2013 Nissan that is all payed off and has my name and my moms name on it. thank you

Submitted: 1 month ago.Category: Finance

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Answered in 39 minutes by:

4/29/2023

Financial Professional: Gagan, CPA, Financial Advisor replied 1 month ago

Gagan, CPA, Financial Advisor

Category: Finance

Satisfied Customers: 1,785

Experience: Expert

Verified

Hi there, welcome to JustAnswer! My name is ***** ***** I’m a CPA, and it’s a pleasure to assist you. I'm reviewing your question now, so please hold on as I will respond with the appropriate answer as soon as I can. As I review your question, please note that our system is built on answering one-off questions and is not entirely based on dialogue. If you have additional unrelated questions after the initial is answered, You can always request me by using my profile link for any additional questions you may have: https://www.justanswer.com/finance/expert-gagank/?rpt=3800

I can provide some general information to help you understand your options. In a situation like yours, you may consider the following:

Credit counseling: Reach out to a non-profit credit counseling agency. They can help you evaluate your financial situation, create a budget, and offer advice on how to manage your debt. They may also help you negotiate a debt management plan with your creditors, which could lower your interest rates or waive fees.
Debt consolidation loan: A debt consolidation loan is when you take out a new loan to pay off your existing debts, ideally with a lower interest rate. This can make your debt more manageable and reduce the overall amount you need to pay back. However, given your current credit score, obtaining a debt consolidation loan with favorable terms may be challenging.
Bankruptcy: Filing for bankruptcy should generally be considered as a last resort, as it has long-lasting consequences on your credit history. Chapter 7 bankruptcy would involve liquidating your non-exempt assets to pay off your debts, while Chapter 13 would allow you to create a repayment plan over 3-5 years. Since your only asset is a 2013 Nissan, you may be able to keep it in bankruptcy, depending on your state's exemptions. However, bankruptcy can significantly impact your ability to obtain credit or loans for several years, so it's important to weigh the long-term consequences.

Customer reply replied 1 month ago

Which could be the better option for me? I’ve been trying to decide but I’m unsure. I have been trying to avoid bankruptcy but I’m not sure what to do and have trouble finding a solution. I feel like I’m running out of time considering how long I’ve missed minimum payments.I really don’t have any assets expect my car which also has my moms name on the title.

Financial Professional: Gagan, CPA, Financial Advisor replied 1 month ago

Here are some general thoughts to help you weigh your options:

Debt consolidation loan: Pros:

Potentially lower interest rates, making your debt more manageable.
Simplifies your debt by combining multiple payments into a single payment.
May help you pay off debt faster if you can secure a lower interest rate.

Cons:

May be difficult to obtain a favorable loan due to your current credit score.
Could extend the time it takes to pay off your debt if the new loan has a longer repayment term.
Doesn't address the root cause of your debt, which may require budgeting or changes in spending habits.

Bankruptcy: Pros:

Provides a legal way to eliminate or restructure your debt.
May allow you to keep certain exempt assets, such as your car (depending on your state's exemptions).
Offers a fresh start and the opportunity to rebuild your credit over time.

Cons:

Has a long-lasting impact on your credit history, making it more difficult to obtain credit or loans for several years.
May not eliminate all types of debt, such as student loans, taxes, or child support.
Requires payment of filing fees and potentially attorney fees.

Given that your only asset is a car with your mom's name on the title, bankruptcy might be an option to consider if you are unable to obtain a favorable debt consolidation loan or negotiate a debt management plan with the help of a credit counselor.

Financial Professional: Gagan, CPA, Financial Advisor replied 1 month ago

Hi, I hope you are doing well. I’ve answered your question to the best of my ability based on the information provided. It’s been a pleasure to be able to assist you. Please don't hesitate to reach out in the future with any additional questions, and thank you for taking the time to use our platform. I will mark the question as completed, and you can always request me by using my profile link: https://www.justanswer.com/finance/expert-gagank/?rpt=3800I hope you have a wonderful day!

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