Dear Liz: I was hurt on the job and was fired. I have a lawyer helping me fight the company, but I have no income and I’m being haunted by collection agencies. I owe $5,000 on credit cards and have a student loan that started at $20,000 but is now $30,000. I was thinking of filing for bankruptcy. I have nothing, and I feel bad all the time. I can’t afford Christmas or birthday presents or find a job that I can do. Any advice would be helpful.
Answer: Bankruptcy could wipe out your credit card debt but probably won’t erase your student loans. Student loan debt usually can’t be discharged in bankruptcy unless you’re totally and permanently disabled. Since you’ve been looking for work, that doesn’t seem to be your situation.
Besides, filing for bankruptcy costs money that you probably don’t have. A Chapter 7 filing can easily cost $1,500.
What you might want to do instead is discuss your situation with a bankruptcy attorney to find out if you might be “judgment proof.” If you are, your creditors can still sue you, but they’ll be unable to collect — at least until your circumstances improve.
Many bankruptcy attorneys offer free or discounted initial sessions. You can get a referral from the National Assn. of Consumer Bankruptcy Attorneys, or find an attorney through its website at http://www.nacba.org.
In the meantime, you can visit DebtCollectionAnswers.com for strategies on how to deal with collection agencies when you can’t pay.