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Question for the Money Doctors

Question submitted on Dec 28, 2010.

Question

I am considering bankruptcy. I have 6 active credit cards with balances. My total credit card debt is $54K. Also, I am going through a divorce and may be left with nothing but debt. My question is: How will filing for bankruptcy affect accounts that have $0 balances. My goal is to preserve one account in order to have some kind of emergency backup. I have one credit card that I am considering paying off before filing for bankruptcy.

Answer

Unfortunately, declaring bankruptcy will most
likely negatively impact your credit rating and your ability to gain credit and
you will pay more in interest if you are granted credit because you will be
considered high risk. Your current card may be cancelled or changed to a higher
interest rate. My advice would be to seek help of a credit counseling service
like CCCS first before proceeding with bankruptcy. They can often restructure
your debt and negotiate payment terms with the credit card companies. Bankruptcy
should be your last choice, however, sometimes that is the only way to start
with a clean slate. Just understand both the benefits (out of debt) and
consequences (poor credit score for years) before proceeding.


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