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Chargeoffs/walkaway vs bankrupcy

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compassion101
Established Contributor

Chargeoffs/walkaway vs bankrupcy

I had a BK 8 years ago and recently was reading something that made me wonder if there might have been a better option for me. Not trying to live in the past but I am curious and want to increase my knowledge.

 

So my situation was about 60k in credit card debt, bills had been paid on time up till then, but was low on funds and recently unemployed (had self-employment income but not near enough to attempt reasonable payback plan), no assets. There was nothing anyone could come after to seize or garnish. Would I have been better to just stop paying? Would the credit cards just charge off eventually (tax hit perhaps, I realize) and leave me with bad credit that fell off after 7 years?

 

I'm not complaining, I think it was a great opportunity to be allowed to dischage my debt and start fresh as I did and I was able to get credit soon after the discharge. Just never thought of the opportunity to just walk away and wondering do people do this as an alternative if they have no assets?

 

 

 

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RobertEG
Legendary Contributor

Re: Chargeoffs/walkaway vs bankrupcy

That is an option.

However, one never knows when old, unpaid debt can pop up.

 

CR exclusion helps to shield the presence of old, unpaid debt through the simple procedure of pulling your CR, but the old debt is still out there.

And CR exclusion is not absolute.  All of the CR exclusion periods of section 605(a) are exempted if a potential creditor requests your full credit report with respect to an application for credit or insurance in an amount of $150K or more.  It is rare for a potential credtior to request an expanded CR, but they have the ability on high principal credit applications to do so.

 

And what of the situation where a potential creditor simply asks if you have any delinquent, unpaid debt?  Do you answer no simply because it has become excluded from your normal credit report?  What if they become aware of it from other sources, such as contact with another creditor?

 

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