'Just because it’s a last resort doesn’t mean you should wait until the last minute to explore it.'
Photo: Getty Images Three years ago, I had a good job and a credit score of 750. Then I had to stop working for almost two years because of a death in my family. During that time, I put a lot of expenses on my credit cards, and I got so far behind on bills that my credit score has fallen to 450. I am now employed again , although I’m making less than at my last job, about $85,000. I’ve also resumed saving, investing, and paying my bills on time.
That said, you may very well be able to get rid of your debt on your own. Plenty of people manage to pay off credit-card debt far worse than yours, although it’s never easy, especially once interest rates pile up. Alternatively, you sound like a great candidate for a debt-relief plan, where you sidestep bankruptcy by working with a credit counselor to iron out a special payment schedule with your creditors.
First, a brief primer: Consumer bankruptcy falls under one of two camps — Chapter 7 or Chapter 13. Under Chapter 7, much of your debt may be forgiven, but you have to liquidate your assets to pay your creditors what you can. Under Chapter 13, you keep your assets and hammer out a settlement that reduces what you owe and requires you to follow a strict payment plan.
Even if you’re pretty sure you can avoid bankruptcy, Shulman recommends consulting a lawyer anyway. Sure, you’ll spend a few hours talking about a very uncomfortable subject, but you’ll walk away knowing all your options, one of which may be credit counseling.
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