Credit Advice

Have a question? Have advice to share? The combined knowledge and experience of everyone in the Credit Karma community can help you. Enter your question or help others below to get started!


Posted in Bankruptcy
Profile Image

Question By

0 Contributions
0 People Helped
I owe about $10,000 in combined debt. Rebuild or file bankruptcy?
I'm 27 years old and want to get a house and car loan for my family, but, I owe about $10,000 in medical, student, and credit card debt. Is it better to repay somehow and slowly build credit or file for bankruptcy? I need the car and house as soon as possible.

Your Credit Scores Should Be Free. And Now They Are.

View your scores and reports anytime.

All Responses

Result 1-1 of 1Results per page: 5 | 10 | 25Page 1 of 1   Previous | Next
Top Contributor
199 Contributions
215 People Helped
Most Helpful Response

Helpful to 1 out of 1 people

$10,000 in debt is not really bankruptcy-worthy. The rule is if your non student loan debt is more than 50% of your combined annual income then you could consider it. I'm not sure what your income is, but I don't think your in dire straights yet. Student loans are exempt from discharge in a bankruptcy. Those *******s are with you until you pay them off. But you're not in a bad place (I have $88k in SL I'm paying off so I'm actually jealous of you!).

The choices you make in regards to your personal finances come down to two things, needs vs wants.

If you don't have a car then I think that's a need to have. Look into a low-cost used car (Toyota and Honda are particularly reliable at high mileage and are very safe). It's not going to be your dream car, but it will get you to and from work every day. This is just a temporary car until you've paid down your debt.

While I'm sure you'd LOVE to buy a house, is it really a need right now? Could you rent and work on paying down your debt and building up an emergency fund and downpayment?

In terms of the debt, look up the concept of debt snowballing. The gist is you make a list of your debts and rank them in order of amount (smallest to largest). Also note the interest rates. Then you start throwing money at the smallest one. Every extra cent you have at the end of the month should go towards this debt. Consider yardsales or selling stuff on CL or Ebay to fund your snowball. Pay the minimums on everything else. Then, when that debt is paid off you take the monthly amount freed up from not having that payment and add it to the minimum for the next target. Continue to do this every month until target 2 is paid off, then you do the same with 3. Make sure you pay the minimums for everything else on time every month. Paying off smallest to largest will give you some early 'wins' that motivate you to keep the snowball rolling.

Once you've finished paying your debt off then you can start aggressively saving for your down payment and efund. I'd actually prioritize 3-6 months of expenses as your efund over the down payment.  The time you spend saving will give your score(s) a chance to rebound after paying off the debt you have. Then when you've got your 20% saved up, find a house, apply for your loan and get the best interest rate possible.

If you haven't read it already, go read Dave Ramsey's Total Money Makeover. It's a very easy read and provides practical and actionable guidance that you can immediately apply to your situation.

Result 1-1 of 1Results per page: 5 | 10 | 25Page 1 of 1   Previous | Next

Your Credit Scores Should Be Free. And Now They Are.

View your scores and reports anytime.


Reply to this Question

Write your response:
Enter Your Comments

The Credit Advice pages of the Site may contain messages submitted by users over whom Credit Karma has no control. Credit Karma cannot guarantee the accuracy, integrity or quality of any such messages. Some users may post messages that are misleading, untrue or offensive. You must bear all risk associated with your use of the Credit Advice pages and should not rely on messages in making (or refraining from making) any specific financial or other decisions.