If you are a single parent, it is important that you understand the ramifications of filing for Bankruptcy. Looking at the long term picture is important before you jump into Chapter 7 Bankruptcy. Here is a typical scenario of a single parent that makes about $37,000 a year, is 32 years old with $32,000 in credit card debt and $7,300 in student loans with a car payment of $320 a month. This single parent is recently divorced because of a serious Internet Gambling problem which both of the parents had.
The majority of credit card debt was accumulated this last year and a half as a result of a divorce and the custody battle. The single parent has sole custody of their daughter and has a hard time making the monthly expenses plus paying the monthly minimums on the credit cards. This is a tough situation but not unsolvable.
It is important to look at other things besides getting out of debt thru Chapter 7. Look at the following:
1. Look at the children, what is their impression of a parent going going bust and their sense of financial security. How is this going to feel for the child when they know Mommy or Daddy can not take care of them. I remember how I felt when my and my brothers bicycles were repossessed because they could not make the credit payments. I still think about it to this day when I hear about someone losing something to the Repo Man.
2. A bankruptcy will stay on your credit report for 10 years. It is also possible to be turned down for jobs, places to live or insurance coverage. Remember that employers, landlords and insurers are now checking credit reports.
3. Eventually, when you finally start to re-establish your credit, it will be at a much higher rate than others with a good FICO Score. There are many hidden charges such as application fees that are higher than the norm.
4. The higher interest rates on your new loans will cost you more and not be available for your own retirement and your children's college tuition.
5. If you take charge of your life and pay your debts off, your child will learn valuable lessons about responsibility and self-reliance. This is one of the best gifts you can give your child that a parent needs to face up to their own debts?
In conclusion, before you even consider Bankruptcy, you should contact the Consumer Credit Counseling Service in your area. This is a nonprofit group can help you negotiate with your creditors for better terms, as well as give you money management skills that you need to learn. Finally, join your local 12-step Program for Debtors Anonymous or Gamblers Anonymous. There are situations where bankruptcy is unavoidable. If yours is one of them, then contact an attorney to work it out. But remember to get all the facts before you file, and think of the consequences of what you are doing to both of you and your child's lives.
To learn more about your money and credit tips, visit our website at http://www.themoneydoctor23.com or http://www.debt23.com
Ron Lovell is available as a professional speaker to help educate your community or group function on the effects of Financial Stability.