Should I file Bankruptcy...

[Gross Negligence]

w/ 7K in defaulted Crd Cards.

a 6K Judgment

and 13K in gov't loan

all are in the negative column on credit report.

Advice?

[lawgirl]

Bankruptcy and financial problems are a huge red flag for the character and fitness review. You need to talk to your state bar and an attorney.

[Blue]

No. Your $13,000 in government loans aren't dischargable under bankruptcy anyways. Suck it up, get some kind of payment plan going, and pull yourself back up. A bankruptcy will totally screw you for the next 7 years, and partially screw you forever. As was mentioned above, it will be a big red flag for character and fitness, and may cost you a job someday.

[defense]

Absolutely not.  $26,000 is not worth filing for bankruptcy (actually $13,000 in dsichargeable debt).  Especially if you are planning to take the bar within the next 5-7 years.  It will be a red flag.  After 7 years you will be fine as far as the character and fitness is concerned. 

[rapunzel]

I presume you are in law school.  If so you can expect that your financial outlook will improve once you are out of school and working.  Get credit counseling from someplace reputable and get on some sort of payment plan.  Your creditors would rather work with you than get no money at all.  The counseling service can often help you get a payment plan you can live with. 

If you debt were greater or you had no reason to expect to earn more money later on, maybe.  But it's a huge mark against your credit for a lot of years.  Talk to an attorney. 

[vixierat]

If you have to file for bankrupcy,and you're not doing it to screw your creditors,it's not a huge red flag. But 13k is not enough money to file for bankruptcy!

-Try to work out a payment plan w/your creditors.
-Talk to your school and see if you should disclose your judgement to your law school. In states where good credit is a huge deal w/the C&F committee(like GA),it might be a good idea to make it obvious that you have been dealing with the situation.

Pfft,13k is nothing in unsecured debt is nothing. Your 13k in government loans is also nothing. There are people in much worse situations than you who can work things out. I'm sure with a little effort on your part,you can come to some sort of solution.

[LawLady]

Um...excuse me.  This person posted because she is probably being hounded by collection agencies and is frightened and upset.  Telling her to just "suck it up and pay" isn't very helpful. Nor is the credit counseling suggestion.  50 % of those places are crooks. The other 50% are funded by the credit card companies. 

I work for a really good consumer lawyer.  If you really are serious about dealing with this, PM me. 

[vixierat]

Um...excuse me.  This person posted because she is probably being hounded by collection agencies and is frightened and upset.  Telling her to just "suck it up and pay" isn't very helpful. Nor is the credit counseling suggestion.  50 % of those places are crooks. The other 50% are funded by the credit card companies. 

I work for a really good consumer lawyer.  If you really are serious about dealing with this, PM me. 

The person needs to call those agencies and make a deal. It's not an impossible situation. Most people on nearly any income level can make a deal to pay off 13k in a few years. All they need to do is call and start the process. Forget outside services-for 13k they're not needed.

[jj3]

I worked in risk management for a top 25 credit card issuer and did significant work with credit bureaus and the underwriting division. Filing for bankruptcy does not "screw you" for seven years. A bankruptcy filing will remain on your credit report for up to 10 years from the discharge date, so lenders will be aware of it. However, most people can re-establish credit within about three years. You can expect to answer a few questions about it when you apply for a mortgage, but if you establish solid credit for three or more years, most lenders will be forgiving of an older bankruptcy.

If you do declare bankruptcy, you should try to get a secured card a few months after the discharge is granted. These cards have hefty annual fees, high interest rates, and very low limits. You also have to deposit 80 - 100% of the credit line you wish to obtain. However, these cards are reported to credit bureaus just like an unsecured card, so it allows you to establish credit quickly.

Of course, in order to get your score back up, you need to be more disciplined this time around. If you can't pay the secured card, it will show up as delinquent on your credit report, even if the amount of delinquency is less than the security deposit. Obviously, that gets you nowhere, so don't do it. Additionally, once you file chapter 7 bankruptcy, you will not be able to file for six years.

In summary, bankruptcy is not as bad as some of the people above make it out to be. Millions of people file for bankruptcy every year, and they go on with their lives. But it is a big step, and should not be undertaken lightly. It's generally a good idea only for people who are really be hounded by their creditors and need the calls to stop.

If you don't file, you should consider credit counseling. Just make sure that the agency you work with is in fact a nonprofit organization, and ask about how they get paid. Most credit agencies will ask your creditors to fork over a portion of your payments. (The creditors will still credit your account for the full payment.) These agencies typically don't do much other than add up your debts and set an amount that you will pay to each creditor every month, but most creditors will reduce your interest rate and stop charging late fees once you start a credit counseling program. The fact that you are in credit counseling will be reported to credit bureaus. While that takes place, it is considered derogatory -- but not nearly as bad as bankruptcy or an all-out default.

I don't know what the implications are for bar fitness, although obviously you should make sure you understand how your state will treat that. Many employers will not hire someone who recently declared bankruptcy or defaulted on loans.

[rapunzel]

The bankrupcy laws are there to give people who really need it a clean slate.  As the OP would only be able to discharge 13 k- half of what he/she owes I don't personally think it would be worth the hassle of trying to re-establish credit. Student loans can be consolidated and paid over time for reasonable rates and the other 13k could be kicked in 3-4 years of diligence.