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The honorable move for a debtor may be to pay off all the debt the incur. But while this may be the honorable move, paying off your debt may isn't always the best move (see some short sales/foreclosures).
This is especially true for seniors who have the option of filing bankruptcy and can withstand the hit to their credit score, The Wall Street Journal reports.
A Kansas couple was saddled with six-figure debt on 13 credit cards, reports The Journal. The husband was diagnosed with Alzheimer's and was unable to continue working full-time.
Faced with mounting debt and an inability to pay, the wife took on an additional evening cleaning job and launched an Avon business. The husband continued working 30 hours per week despite his illness, and they were able to work on repaying their debt.
But the couple may have been able to discharge their debt much more easily and without the need for taking on additional jobs had they just filed for bankruptcy.
Given the couple's age, experts say that they should have explored filing for bankruptcy, reports the Journal. That's because couples on the verge of retiring and who have already paid off their mortgage have less to worry about when their credit score plunges following bankruptcy.
Generally, a household can file for a Chapter 7 or Chapter 13 bankruptcy. With Chapter 7 bankruptcy, an individual can discharge his debt and receive a fresh start. In return, some of the debtor's property is gathered and sold off to help repay the debt. In contrast, a Chapter 13 bankruptcy simply reorganizes your debt and sets up a repayment plan. You do not have to liquidate your assets with a Chapter 13 bankruptcy, but you also don't immediately discharge your debt either.
It was reported that the Kansas couple was offered bankruptcy as a solution, but they chose not take that route. The couple felt responsible for their debt and for that they were named "Clients of the Year" by the National Foundation for Credit Counseling.
Meeting with a lawyer can help you understand your options and how to best protect your rights. Visit our attorney directory to find a lawyer near you who can help.