STATEN ISLAND, N.Y. — Many people will find themselves in debt at some point in their lives.
And it doesn’t matter whether you lost your job or it’s medical bills that have piled up, when you don’t have the money to pay your debt, collectors will track you down. But when deciding whether to file for bankruptcy, there are a lot of factors to consider.
For this reason, we sought advice from Karra L. Kingston, a bankruptcy lawyer on Staten Island and in New Jersey, who has helped hundreds of people get out of debt.
Question: I have 30K in credit card debt. I earn 70K a year. Should I file for bankruptcy?
Kingston: “Filing for bankruptcy is a difficult decision to make, but it can be the most effective way to take control of your finances and make a fresh start. Bankruptcy laws were established to help people who are struggling with debt to find a way out of their financial difficulties.
When deciding whether to file for bankruptcy, you need to assess your financial situation, including whether you have enough money to repay your debts, and whether your monthly expenses are greater than your income. If you find that you cannot make a dent in your debt, bankruptcy might be the best option. Unfortunately, many people put off filing for bankruptcy, which only leads to their debt increasing over time. By filing for bankruptcy, you can hit the reset button on your finances and start putting away savings.
It’s worth noting that bankruptcy does not necessarily mean you will have bad credit forever. Many people find that within two years of filing, they can rebuild their credit score. For example, if you have $30,000 in debt and your monthly payments aren’t making a significant impact due to high interest rates, filing for bankruptcy may be the best course of action.”
Question: What are the pros and cons of filing for bankruptcy?
Kingston: “Bankruptcy laws exist to offer people a fresh start, even if the initial interest rates may be higher. Despite this, potential bankruptcy filers should not be discouraged. In fact, many people who file for bankruptcy can obtain credit cards and car loans almost immediately after receiving their discharge. Mortgage applications, however, have different waiting periods, ranging from two years from the date of bankruptcy discharge for first-time buyers to four years for conventional loans.
Bankruptcy provides a lifeline for those facing wage garnishments, foreclosures, bank levies and judgments. Upon filing for bankruptcy, an automatic stay is put in place, halting all collection activities against the filer.
While bankruptcy can eliminate many debts, not all debts are dischargeable. Common debts that can be discharged include credit card debts, personal loans, certain tax debts, medical debts and some student loans. However, back pay in child support, criminal fines and most student loans are not dischargeable.
Furthermore, some assume that filing for bankruptcy will ruin their credit score indefinitely. However, for some, the elimination of debt can actually result in a higher credit score due to lower credit utilization. It’s worth noting that bankruptcy stays on a credit report for 7-10 years, depending on the type of bankruptcy filed.
Most people can keep their property when they file for bankruptcy by using various exemptions. However, not everything is exempt, so it’s important to consult with a lawyer to ensure that your property is protected if you decide to file for bankruptcy.”
If you have a financial question you’d like answered, please send to [email protected] and we’ll find the right expert to answer your question.
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