Dear Liz: I am a 49-year-old single father with two boys, 17 and 12. I had my own business for five years, which I finally gave up last year. I have credit card debt of about $68,000. My credit score is still good and all payments are current. I do not own a house, and I do not own much personal property either. I found a job a few months ago, and with that, I can still make payments every month. But I just figured out that it will take me about 40 months to pay them all off.
I am considering filing for Chapter 7 bankruptcy. My thinking was to file for bankruptcy now to wipe out the credit card debt, so that I can start saving for my retirement and the boys’ college. But I also heard that some student loans are based on parents’ credit, which worries me.
I have a car in good condition, but I will need to replace it in a few years because it is 15 years old. I also would like to start another business on the side, which will be easier if I still have credit.
I’ve read a lot of advice on the Internet, but I’m not sure whether I should file for bankruptcy. What do you advise?
Answer: That you not rely on Internet opinions when making a decision this monumental.
You really need to speak to a bankruptcy attorney about your individual situation. What you’ll probably discover is that you’re not a good candidate for bankruptcy, since you’re able to pay off your debt in less than five years. People who are allowed to file for Chapter 7 bankruptcy liquidation typically have far more debt than they could repay in that time period.
There’s another reason you probably shouldn’t file: You need to learn how to live within your means. You seem to be eager to start the borrowing cycle all over again, even though it ended in disaster last time.
Business-related debt is good debt only if it helps you get ahead. If you use credit just to keep a failing business afloat, it’s bad debt.