Is bankruptcy my best option?
Hey, this is a throwaway because I feel a bit of shame about my predicament: I’m looking into whether bankruptcy is the best option for me.
I am 34, and had accumulated $110,000 of student loan debt and around $15,000 of debt to the IRS before graduating from college. Over the past few years, I whittled that down to around $87,000 (and $8,000 to the IRS). I haven’t been getting rich, but I’ve been able to pay down my debt while saving for retirement.
Last year, I tore my ACL, had surgery, and ended up accumulating an additional $38,000 of debt. So, as it stands now, my debt consists of:
* $87k student loans
* $8k IRS
* 38k credit cards
I make $54,000 per year.
I was feeling overwhelmed, and met with two bankruptcy attorneys who both suggested I file a chapter 7 bankruptcy. I’ve spoken to about 5 people in my life outside of them, and some feel that it is obvious that I should declare bankruptcy, and some feel it is obvious I should not. I feel incredibly conflicted, and feel like I am in a lose-lose scenario.
My budget:
$3,374 take home
-$1500 minimum payments on various debt (Will likely go up, as credit cards are 0% interest currently.)
-$850 rent
-$130 utilities (gas, electric, internet bill split with others)
-$30 gym
-$276 health insurance
-$50 car insurance
-$350 groceries
-$75 gas
-$15 car registration fund
-$8 oil change fund
-$42 Christmas fund
-$4 YNAB
-$9 Amazon Prime
-$35 misc / unexpected expenses
I have not missed any payments, and I do not need to. I know that I can cut my grocery bill or quit the gym to save more money. I also know that even though I work 10 AM to 8 PM M-F and 9-2 S, I could pick up more work on weekends.
If I were to declare bankruptcy, I would be rid $46,000 of debt (all-non student loan debt, as the attorneys told me my IRS debt is eligible for discharge). The minimum payments I am making towards that 46k is $975 per month, which I could then use to put pay down my student debt faster, and perhaps put some money in a Roth IRA. I also have ~$9,000 cash, which I was advised to spend paying small chunks of debt across the board before declraing bakruptcy if I do that, or retaining as an emergency fund, if I don't.
On the one hand, I do not HAVE to declare bankruptcy. I can meet my obligations. Bankruptcy feels shameful and feels like giving up, and at times feels immoral. I also know it will wreck my credit for a couple years, stay on my report 10 years, and will cause me to check “Yes” on applications asking whether I’ve ever declared bankruptcy the rest of my life. I know it may potentially hurt my ability to rent, and (of particular interest) may hurt my ability to get new jobs.
On the other hand, if I declared bankruptcy I I could take the $975 of minimum it sometimes feels as though not declaring bankruptcy is to suffer through the next couple decades for my sense of cultural shame. While bankruptcy would hurt my credit, I am years and years out from being being in a position to apply for any kind of loan anyhow. I have no ability to save for retirement right now, so choosing not to do this could affect me the rest of my life. It sometimes feels as though bankruptcy was set up for things like this.
As I said, I am severely conflicted. I’m not sleeping well and my mind is spinning its wheels, because the decision feels life-altering in either direction.
So please, if you have any insight that could help me, I am open. Should I declare bankruptcy? If so, why? If not, why not, and what should I do instead? What are the stepsor changes that can lead to financial security and health in the end?