Question: Is bankruptcy a better option if the amount gets to high as opposed to making minimum payments for the rest of my life? I was in a serious accident 18 months ago with no insurance, my credit and debt is off the charts ($250k). My credit was good before that. I will never get that amount paid off. But it may be possible to make minimum payments forever.
Answer: There is a lot about you I do not know, so this is not an easy answer. I am guessing that you have an extremely well paying job. A typical rate of interest on credit card debt is 18%. On $250,000, 18% interest generates an interest bill of $3750 per month. Even if you are only paying 6%, your interest bill is still $1250 per month. You are probably playing the game where you are constantly applying for new credit cards with low teaser rates, and then getting a new card when the introductory period expires. This is unsustainable. Each time you apply for a new credit card, even if it is only to do a balance transfer, your credit score goes down. After a while, it gets hard to get these very low rates. What is worse, if you are ever late on a payment, this whole house of cards will collapse.
If you are only able to make minimum payments, then you have little or no ability to secure fresh credit. With this much credit card debt, you probably cannot qualify for a conventional mortgage, and unconventional mortgages are hard to find these days. As I do not know the details of your situation, I can only wonder what it is you hope to accomplish by paying the minimum payment for the rest of your life. I question whether you really can make minimum payments forever any way. I do not know how old you are, but hopefully some day you will retire. What will you do then? Are you married? Do you have children? There are a lot of factors to consider when you are trying to predict your financial needs forever. Given your time frame, you have ample time to recover your credit from a bankruptcy filing. As it appears that you have a very good job, I suspect you will fully recover within a few years of receiving a discharge, even if the bankruptcy remains on your credit report for as long as ten years. However, I also suspect that you will find yourself in a “high income”, five year chapter 13 plan. Making these payments for five years still beats making them for the rest of your life. I can envision scenarios where bankruptcy might not work out so well for you, but these are very budget specific. My recommendation is that you see an experienced bankruptcy lawyer as soon as you can and see what your options are. You should be very careful about what lawyer you see, and might do well to visit a few attorneys. Your case is not typical. A lawyer who “dabbles” in bankruptcy might cause you some real problems.