Expert: Regan Shinski - 3/14/2010

Question
QUESTION: I have several outstanding payday loans and I am considering filing bankruptcy.  However, I would have no problem making arrangements to pay my creditors the principal amoounts on these loans, as the interest on these loans every pay period is the only thing preventing me from paying down on the principal. May I file bankruptcy and still pay the principal on these loans?     Would the court take into account my willingness to settle in this manner?

ANSWER: Most creditors will not, actually cannot, accept payment on accounts that have been included in a chapter 7 bankruptcy as it is a violation of federal bankruptcy law.  This is even if you offer to pay it.

The option if you are determined to pay is to file chapter 13 bankruptcy.  This essentially creates an interest free consolidation loan for about 5 years.

Many people say why file chapter 13 to repay the debt if you qualify for chapter 7 that would eliminate the debt in its entirety.  I will not make the moral decision for you, but those are your options.  Both have the same amount of damage to your credit scores.

Good luck.

Regan

---------- FOLLOW-UP ----------

QUESTION: Thanks for your extremely helpful answer to my question!  I forgot to include in my question the fact that I have worked for a major bank for the past 21 years.  I want any bankruptcy decision on my part to affect my employment as little as possible. Thanks again for any advice you can give.

Answer
I can't answer how your employer will view any bankruptcy you may file.  It depends on the employer and what position you hold.  Bankruptcy will stay on your credit report for about ten years, so think it through carefully :)  Sometimes honesty is the best policy or maybe even consider discussing with the personnel department in advance or search internet boards for information.