Waaaaay OT - Financial Questions

  I recently met a young couple who are struggling financially.  He was laid off from his job and she's doing temp work.  When money was coming in on a regular basis, they didn't save anything, just expected it to keep coming, I guess.  Right now his mom is paying his car note.  I'm not sure where the rest comes from.  They have some debts and were thinking about filing for bankruptcy.  My gut response to that was it seems unfair to skip out on your obligations, but then again, the bill collectors aren't calling my house.

Does anyone know how bankruptcy works?  Doesn't it blemish your credit for like 7 years?   

Also, I've read that some credit counseling services are crooks and people can wind up worse off.  How would they go about finding someone reputable?

I am not a financial advisor, so I don't know how to direct them.  Neither of them had even seen a copy of their credit report.  I recommended that to them as a first step.

My suggestion is to look into www.daveramsey.com  he has really good down to earth plans for help. 

Thanks so much.  I will pass this information on to them.

I have worked with people who are having difficult times financially and have recommended non-profit credit counselling services.  Some are better than others -- calling your local legal aid office may be the best place to start -- they should be able to recommend a good agency.   

Thank you!

YES I Agree  Daveramsey.com  He's the best financial advisor he sure helped us and we are Finally Debt free! of course there will probably always be the exception like the morgage! lol! but really the plan works!

I managed the BK deptartment at a mortgage company for many years.  After BK reform several years ago, most people (if they have any income) are forced into chapter 13 so they must repay their debts.  If they are unemployed though, they'd likely be allowed to file a 7.

CCCS is a good place to start.  They are legitmate.  There are more crooked credit counseling services than good ones I'm afraid.  Tell them to never pay for a service that will "repair" their credit.  You cannot buy your way out of bad debt.

Yes, a BK stays on your credit report 7-10 years.  However, so does delinquent payment history.  Either way, it will affect you negatively.  It really isn't "better" in terms of your credit report to pay the debts off over time if they are paid delinquently.  Sometimes BK is a good alternative to start over (very select cases....it is far too abused).

I googled CCCS and there are several credit counseling websites with this acronym.  Which one did you mean?

CCCS = Consumer Credit Counseling Services

There is a way to make paying off a bad history more attractive than a Bankruptcy.  If you pay the debt off in full you can request they remove it from your history and get them to give you a letter authorizing the removal.  This will remove it as if it was never there.  I had a few things on my report I didn't know about until I was buying my house.  I did this and within 2 months they were gone and I got about a 50 point boost.