Q&A with John: Should I Declare Bankruptcy?

John Ulzheimer
John Ulzheimer

ByJohn Ulzheimer

Question: please help, divorced 6 months ago, bought home instead of renting, now 75,000 in debt, own concession business, seasonal, make 25,000, 6mo saved money for winter months and work pt, cant find any jobs that pay halfway decent, truck was repoed 2 days ago, owed 26,000, worth only 17,000, need truck to run my business. Lawyers, courts ,x wife took all my savings, owe back child support (3000), in the process of filing bankruptcy, i know it wont affect to support my kids which is all i care about, 3 live with her and one with me. Need to keep my home not much equity since the market bottomed out in the poconos, i would sell the business if need be and get a job but with no college, just experience, hard to come by. barely paying my needed bills only, no extras, i am broke what can i do??? my credit score went from 680 to 420 how can i get a loan for a vehicle. please help.

-A. from Pennsylvania

Answer: Thank you for your email. That's a difficult position you're in but I'm happy to try and help you.

Your dilemma is two-fold. First, your income doesn't support your expenses, despite them being very modest. Second, your credit scores are going to make it next to impossible to get any loans.

I almost never suggest bankruptcy but in this case you should visit a bankruptcy attorney. The silver lining is that with an income of $25,000/yr you likely make less than the median in Pennsylvania. That means that you could file for a Chapter 7 bankruptcy and essentially do away with all of your debt, except for the child support and any tax liens that you may have.

The cost to file went up in 2005 and now you also have to take mandatory credit counseling, which is also not free. My guess is that it will cost you about $1,200 to file.

The BK will remain on your credit files for 10 years but your scores are already so low that it won't cause any additional immediate damage. And, the fact that you will almost be out of debt (child support remains) means that you can get a fresh start.

I recognize the desire to stay close to your children; I have an 8 month old myself. But, there are other job markets in the U.S where jobs are plentiful and employers have to pay decent wages to keep people…even if you don't have a college education.

Good luck my friend!