Chapter 7 Bankruptcy as a First Choice

When most Illinois residents are considering different ways to manage their debt, many assume that filing for personal bankruptcy is an option of last resort. However, according to a recent article in the Huffington Post, Chapter 7 bankruptcy may in fact be the best option for many debtors. One of the most important issues to consider when deciding how to deal with your current debt, according to the article, is whether “you have a greater responsibility to repair the past, or the future.”
If you’re thinking about filing for consumer bankruptcy, you should be sure to talk with an experienced Oak Park bankruptcy lawyer. Bankruptcy laws are complex, and it’s important to have an advocate on your side.
Repairing Debt Could Cost You Millions
If you have a significant amount of credit card debt or other bills for which you make monthly payments, you might have heard that the best solution is to spend less on everyday purchases and to pay more than the minimum with each billing cycle until you’ve paid off your debt. But for most Chicago residents, getting rid of debt doesn’t work precisely that way. For starters, it’s pretty difficult to cut spending in such a way that you can actually afford to pay off your credit card balance in a reasonable amount of time.
Additionally, you might have heard about credit counseling or debt settlement programs. In a surprisingly high number of cases, these “programs fail to achieve the result advertised.” To be sure, numerous Illinois residents who choose to go the route of credit counseling don’t end up in a better financial position. For instance, the Huffington Post article lays out a telling hypothetical.
In the hypothetical, you’re 30 years old and owe $22,000 in credit card debt. You work with a credit counseling program that consolidates your debt. You pay $418.00 each month over a five-year period until your debt is paid off. With the consolidation, you don’t end up paying a terrible amount in interest—your final repayment is about $25,000. However, “the real cost of your consolidated repayment was not 25 thousand dollars,” but rather “was as much as $590,000.” How could this be the case?
If you had filed for Chapter 7 bankruptcy instead of consolidating your debt, you could have been putting your monthly payment toward a retirement fund. With a nearly 10 percent return on your retirement savings, you could have had significantly more income. And if you were to settle that same $22,000 in debt after the same five-year period, you also could have come out in a better position. You could have saved the $418 monthly payment and settled your total debt for around $10,000.
Debt Consolidation vs. Chapter 7 Bankruptcy
Did you know that filing for chapter 7 bankruptcy can actually be quicker, and cost you less money in the long run, than going through a debt consolidation program? In a good scenario, a chapter 7 bankruptcy might cost, on average, $1,500 and take 90 days from start to finish. With debt consolidation, however, you’re talking about more than a handful of payments over a multi-year period before you’re out of debt.
Does it make more sense to file for bankruptcy—looking toward your future--than to attempt to repay debts through a debt consolidation program? Although each case is different, filing for consumer bankruptcy may be able to help you get out of the anxiety-inducing debt situation that you’re currently facing. Contact a Chicago bankruptcy attorney at the Emerson Law Firm today to learn more about how we can assist you.
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