Being in debt is a stressful situation, especially if it is difficult to manage the debt. Unemployment, an illness or even a divorce can turn a once-comfortable financial situation into a nightmare of collection calls, final notices and threats of litigation. For Chicagoans who seek ways of relieving the stress, filing for bankruptcy can be a viable solution. However, before taking that route there are some things that should be considered.
A person should calculate exactly how much debt they have that could be wiped out with a Chapter 7 bankruptcy filing. For the most part, people with $50,000 or more in debt will find relief through a bankruptcy filing. Those with less debt can find the same relief, but financially it could be more prudent to try to make payment arrangements on smaller debt amounts. A bankruptcy is a critical hit on your credit score and report, whereas payment arrangements, even long term, are not as detrimental.
Many people go the route of bankruptcy to seek an end to the harassing phone calls from creditors and collection agencies. However, a person could choose to ignore the phone calls and letters until his or her financial situation improves and a payment arrangement can be worked out. Explaining your situation a few times at first will get your side of the issue on the record, since anyone who contacts you regarding a debt is required to make notations regarding any communications the person has with the debtor. Once you have explained the situation and let the person know you will contact them when your financial situation improves, you can just not take the calls.
Creditors and especially collection agencies can be relentless when trying to collect a debt, and some collection agencies will go as far as making threats or lying about what they have the ability to do. If you receive any such threats from a collection agency, you do not have to accept the abuse. By contacting a legal professional with experience in the area, you can stop the harassing phone calls and possibly help find alternative solutions to your financial issues.
Source: MSN Money, "When does bankruptcy make sense?" Justin Harelik, Nov. 26, 2013