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Commentary: Chapter 7 Bankruptcy As a First Option

If you’ve been battling credit card and/or medical bill debt for a long time, you are not alone. Many Americans are still in debt that they cannot escape. You may have tried or heard about plans to spend less, save more, shift debt, consolidate, or debt counseling and debt settlement programs. These programs can be successful, but many hard working Americans can’t dig themselves out of debt this way because it keeps growing.

For these people, chapter 7 bankruptcy can be their ticket to being debt free and building a promising future. If you’re already uncomfortable with the idea of filing bankruptcy, think of this simple self-assessment question; Do you think you have a greater responsibility to repair your past, or your future? Would you change your answer if you knew that you could lose nearly $1 million dollars in retirement funds by spending the time and money to fix your past? If you still can’t wrap your head around filing chapter 7 bankruptcy now to secure a better future for yourself, chew on the math below.

The cost of consolidating credit cards into one payment.

Assume you are 30 years old and have $22,000 of unsecured debts (mostly credit card bills) that you can no longer afford. You consolidate your credit cards into one payment working with a nonprofit counseling agency. Your new lower payment is more affordable, at say $418 each month. And you are set to pay that same monthly amount over 60 months, for a total repayment of roughly $25,000. You complete the plan and feel like the biggest weight of your life has been lifted, and you do not look back.

If you do not look back, you will not see that the real cost of your consolidated repayment was not $25,000. If you were to have instead contributed that same $418 per month into a retirement fund for that same 5 year period, your retirement fund would already have a balance of nearly $32,000. If you continued that trend with an average return of 9.74% until you reach a retirement age of 65, you would have a $590,000 retirement fund. Still think it was better to pay off that credit card?

The cost of settling unsecured debt

Assume the $22,000 total debt can be settled for less than the balances owed. This requires you to stop paying your credit cards or bills, and to save up enough money to make a lump sum payment that is negotiated with the debt holder. Let’s say you negotiate to settle your debt for $10,000. That time and lost opportunity could result in long term losses of roughly $270,000 were that money placed into a similar retirement fund using the example above.

The costs of a chapter 7 bankruptcy

Most chapter 7 cases can be completed for an average cost of $1,500 to $1,800 from start to finish, and take as little as 90 days. For many people, the fees for bankruptcy are the equivalent of three months’ worth of minimum payments on $22,000 of credit card debt. So it does not cost the debtor any more than paying the minimum monthly debt payments he or she is already paying.

People trading down their personal financial performance to fix a debt problem from yesterday, or today, are not contributing to their local and regional economies while they are off the track, or running at lower speeds. This means fewer jobs nationally and globally. Fewer jobs mean less demand for goods and services. This in turn means fewer jobs, even less demand and a feedback loop that drives at the very heart of most financial frustration.


If you need bankruptcy help in the Pasadena area, contact the experienced chapter 7 bankruptcy attorneys at DCDM Law Group today!


Dheeraj K. Singhal
About the Author
I help people keep the things they want and get rid of the things they don't want. I have been a lawyer for over 12 years and there are few things I enjoy more then getting great results for the people that trust me with their legal problems.
  • Marylou

    Thoughtful writing ! For my two cents if others are wanting a a form , my wife encountered a fillable version here