Considering Bankruptcy

I’m 42, renting in Brooklyn.
$12K in credit card debt.
$15K in tax debt (federal + state).
Just checked my FICO credit score and it’s 515.
I have no assets and no savings.
My wife and I both lost our jobs because of coronavirus. We now receive unemployment and thankfully it has stabilized us for now so that we can at least cover our bills and buy food.
My credit cards will both go go to collection agencies very soon and I would like to speak with someone to weigh my options and strategize. I wonder if declaring bankruptcy might be my best option. My credit score is already garbage and I don’t see myself needing any loans in the next few years. Although maybe it’s better to try and manage the debt? Maybe bankruptcy wouldn’t erase my tax debt? I just don’t know what to do and I would very much like some counseling. Can anyone help or point me toward resources? Thank you so much. Eric

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So, I was able to pay off about $14k with the help of MMI: They negotiated with my debtors to bring down my monthly payments, APR, etc. and may be a good place to look into before filing for bankruptcy. I used them and highly recommend their service.

Thanks, I appreciate the advice. I’ve consulted a lawyer and ruled out bankruptcy, now I’m wondering if it would be better to let my credit cards go into default so that I can negotiate a lower lump sum payment. I know I’ll take a hit on my already terrible credit score when the cards default, but then I should be able to pay them off immediately if I can get the collection agencies to accept half or less, which I’ve read is not uncommon. If I keep the credit cards and bring those accounts current, I’ll be left with a much larger debt that will take much longer to pay off. Trying to find the best strategy here.

Small point. Don’t declare bankruptcy until you know you’ve hit bottom and you have a path up.

Your primary objective should be obtaining income, maintaining income, shoring up cash. Discharging any funds to debts right now does not make sense. First, you generally have the right to moratoriums with credit card companies. Have you asked for them yet? If not, there are letters you can find online to get yourself 1-? months without any necessary payments. Do that for all cards ASAP. You also may want to check out for many, many resources that will help you with both the credit card and tax debt. The IRS is actually incredibly friendly, flexible, and appreciates construction communication. Is your tax debt confirmed or an estimate in your own mind? If the latter, your tax debt may be much less than you think. Letting cards go into default does not always turn into a basic collection. Sometimes it turns into lawsuits by rogue collection agencies, sometimes the issuing bank will sue you directly. ALL of these entities will negotiate whether you are in court or not. If you go through the court system, the system is on the side of the debtor and you will find flexibility beyond what you can imagine. IF you end up sued, you will use for free legal services. Highly recommend you start with where you will get the focus on getting yourself stabilized first before discharging funds to your creditors. At the end of the day, your creditors want you stable and earning so you can pay them! That is the priority. All best.

Don’t be afraid of bankruptcy. I had over 50,000 dollars in credit card debt. I declared bankruptcy, and got clear of the debt, a year or so later I get a credit card and a year after that I bought a house with my spouse. One thing to do is try to keep a spouse with a good credit record to tie you over that difficult hump of having no credit. Also you might as well run up a little more debt before you declare bankruptcy. And you don’t need a lawyer. I did it myself and was successful.

Sheldonbkr - what resource, if any, did you use to file bankruptcy, if you don’t mind sharing? Thanks.

Hello Fbee71,

Sorry for the delay in replying. Basically I used one of these NOLO Legal Guide books for Chapter 7 Bankruptcy. Plus, because there are some state specific laws, the state judiciary website, (mine Colorado).

In total seriousness, it is a lot easier to do this yourself than you would have imagined.


One thing that happened to me, after I let my accounts go into default, I got sued, served with a summons to court. Then I filed for bankruptcy and that put an end to that.