Nearly every American walks around with some debt. According to the federal government, paying more than 40% of your gross income to pay your debt burden is an indicator of financial distress. Most of us have mortgages, many of us have auto loans or college bills and we surely cannot forget credit cards. The total amount of credit card debt in the United States exceeds 750 billion dollars and the average household has over $9,000 in credit card debt spread over thirteen credit cards! For example, the average forty-year-old person making $50,000 to $100,000 has about $108,000 in debt. Chances are a lot of it is credit card debt. To add to this misery, unemployment rates are at record levels and bankruptcy filings have skyrocketed. Let's face it, two years ago many of us were saying "Let the good times roll." Now many Americans are wondering how to get rid of credit card debt. Perhaps you are considering credit counseling, debt consolidation, or bankruptcy. If you are considering bankruptcy, think again!

Q:  What is the advantage of Chapter 13 over a Chapter 7?

A:  A Chapter 13 bankruptcy is ideal for debtors who either have too much income to file for a chapter 7 bankruptcy or have debts that are not dischargeable. Chapter 13 bankruptcy is also ideal for debtors who are behind on their home or business payments. A chapter 13 bankruptcy allows them to make up their overdue payments over time and to reinstate the original agreement.
 

Q:  Can all debt be included in bankruptcy?

A:  Both types of bankruptcy may get rid of unsecured debts and stop foreclosures, repossessions, garnishments, utility shut-offs, and debt collection activities. Both also provide exemptions that allow you to keep certain assets, although exemption amounts vary. Personal bankruptcy usually does not erase child support, alimony, fines, taxes, and some student loan obligations. Also, unless you have an acceptable plan to catch up on your debt under Chapter 13, bankruptcy usually does not allow you to keep property when your creditor has an unpaid mortgage or lien on it. Also debts incurred in recent months cannot be included.
 

Q:  Will I lose everything including my home in bankruptcy?
 

A: Each state has established exemptions from bankruptcy court and all consumers should review their state exemptions before contemplating bankruptcy. One final point... if bankruptcy is inevitable, keep your head held high. It is not the end of the world... it just feels like it. Even bankruptcy does pass and you should never lower your head because circumstances overwhelmed you. Just learn from your experience. That's all.
 

Q:  If I have a cosigner on a loan, will the cosigner be affected by bankruptcy?
 

A:  You should be aware that any cosigner automatically becomes liable for the full amount of a co-signed debt. If this is not what you intend, you should not file or you should make arrangements with the court for repayment. But even debts you do not want included (such as a loan from a friend) must be included since the court does not accept any partiality
 

Q:  Bankruptcy Disadvantages
 

A: Bankruptcy is terribly intrusive because you are required to publicly disclose your financial activities over the previous two years. You must also disclose the current property that you own. Additionally, bankruptcy is emotionally draining because many people interpret bankruptcy as meaning failure. Bankruptcy also leaves a long lasting mark on your credit report and does not rid you of student loans, certain child support obligations and certain tax debt.

Q:  What other options should be considered?
 

A: 

• First consider whether the debt problem is temporary or will the circumstance last a while. Permanent disability may be far different than job loss. Both are devastating situations but one may or may not require bankruptcy and the other may only require negotiating with creditors.
   

• Creditors are human beings. They are also business people. They do not want to see bankruptcy for you. They know customer relations are their lifeline and bankruptcy is profit out of their pocket. Therefore, see if they will work with you to lower payments, skip a payment, change billing dates, anything. Do whatever is necessary!
   

• If all else fails send a smaller than minimum payment. You can not get in trouble for making a bone fide attempt to repay creditors no matter how small the payment.
   

• Instead of thinking of all the debt you have or the high interest or high balance debt, think of the debt that can be paid off fastest. Is there any way to pay one debt off quickly by selling something and then use that added income to apply towards the next fastest payoff. In other words, do not try to chop down the whole rose bush. Work with cleaning off one or two unsightly limbs first and see where you are. It is far to easy to get tangled up in the thorns and not be able to envision a clean emotional environment.
  
  Get professional help from MyDebtIQ.com, a legitimate financial services company.

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