Nobody wants to file bankruptcy. Nobody wants to go to the dentist. Unfortunately, sometimes you don’t have a choice. When you have a financial debt problem you must seek your debt relief options unless you have the capability of paying off your debt within a short period of time. Life can go by quickly, and if you have kids they are likely going to want to go to college. That will get here more quickly than you realize.
College gets more expensive every year. Dorm rooms, sorority and fraternity dues, food, books, tuition…it all costs money. Most children are not fortunate enough to get a full scholarship. More than likely, you are going to want to have the ability to give your child money when they are in their short college years that are going to make up the most memorable time in their life.
Also, one day you are going to want to quit working and retire.
If you spend all of your money during your earning years on servicing credit card debt, then you are not going to have any to give to your children in college or to allow you to retire. Debt settlement is sometimes an option if you have a high level of income and a large amount of debt. Many times, filing for protection under Chapter 7 or Chapter 13 of is your best option.
First of all, if you do a debt settlement plan then there are likely to be income tax implications because forgiveness of debt is included in your gross income and you are taxed on that forgiven debt. An exception to that gross income rule is discharge of indebtedness under Chapter 7 or Chapter 13. If you owe $40,000 in credit card debt and you file a Chapter 7 then you will not owe any taxes on the discharge of the entire $40,000.
Often times, filing a bankruptcy is the quickest way to re-establish your credit score because your debt to income ratio quickly improves. Many people share the common misconception that bankruptcy ruins your credit for many years. If you properly utilize the Bankruptcy Code then you can quickly rebuild your credit shortly after you receive your discharge.