Yvette was hit hard by the recession of 2008. She lost her job as a retail store
ID: 425089 • Letter: Y
Question
Yvette was hit hard by the recession of 2008. She lost her job as a retail store manager when the chain went out of business. After collecting unemployment for six months, she found a job waitressing. Her credit cards are now maxed out, and she is having a hard time paying her bills. She is 28, single, and lives in a major metropolitan area.
Is bankruptcy the best option for a person with a heavy debt load and low prospects for a significant pay increase in the near future? If so, which version of bankruptcy should Yvette file? Consider the pros and cons of bankruptcy in her situation. What alternatives could she try?
Explanation / Answer
Yes bankruptcy is the best option in her case. Yvette should consider straight bankruptcy. Straight bankruptcy can viewed as a legal procedure that results in wiping the slate clean and starting a new. Straight bankruptcy does not eliminate all the debtor’s obligation, nor does the debtor lose all of his or her assets. E.g. the debtor must make certain tax payments and keep alimony and child support payments. The debtor is allowed to retain certain payments from social security, retirement and disability benefits. The debtor also may retain certain the equity in a home, a vehicle and some other personal assets. It is important to note that student loans, criminal obligations and certain other debts are not discharged by straight bankruptcy.
The other Alternative Yvette could try is the wage earner plan. The wage earner plan may be defined as work out procedure involving some type of debt restructuring by, normally by establishing a debt repayment schedule that’s more compatible with the person’s income. Interest charges are waived for the repayment period. The repayment period depends on the debtor’s monthly income compared to the applicable state median. During the repayment period, the law forbids creditors from starting or continuing collection efforts.
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