This is a tough one, and it was the question I was asked last night by a client over the phone.
His daughter works part-time as a waitress, she only owes about $7,500, but more debt is coming. Her boyfriend moved out of their shared apartment, and her name is the only name on the lease. She moved back in with Mom and Dad, but they can’t pay the $7,500, she’s getting garnished, and that apartment lease is going to come after her soon as well.
Normally, if someone owes under $10,000, I tell them that it’s just not worth it. $10,000 is really only a car payment for many people, and it stinks, but you can pay it back over time. Here, she owed that much, plus was getting garnished, plus her life was a wreck. Mom and Dad were flailing, trying to find an answer for her. It was obvious that Dad loved her, was worried for her, but wasn’t in a financial position to write a huge check.
In this situation, I discussed what would happen in a chapter 7, warned that she would have bad car loan interest rates for the next 2-3 years, warned that she couldn’t purchase a home for at least 2.5 years, and warned that she’d always have a bankruptcy to her name. Then, I gave them a cut-rate price, because it wasn’t that hard of a case, and she needed a break.