Sued By Chase Bank For $7500. Should I Declare Bankruptcy?

UPDATE: Sued By Chase For $7k, In Debt For $40k+, I Think I’ll Declare Bankruptcy

Chase is suing Justin’s friend for $7,500. He’s now drinking away his sorrows and thinking about filing for bankruptcy. Should he do it?

Justin writes:

Yesterday my friend was served a lawsuit from Chase Bank for $7,500. Naturally, what followed was an attempt to drink away the problem last night, which succeeded only temporarily. This morning he finds himself still being sued by Chase.

Here’s some background on my friend and the lawsuit. He racked up the consumer debt with Chase when he was doing relatively well as a retail store manager. However, two job changes later, he finds himself in a low paying, sales associate position at a big box retailer. I believe he likely has other consumer debt, as well, that is simultaneously ruing his credit. He lives at home with his family, and about the only possession he owns is his car (which he still owes about $7,000 on, but has faithfully been making payments on for 2 years).

Having never dealt with this situation, my simplistic advice to him was to seek counsel about the lawsuit (even if it’s going to cost a few thousand dollars over the next few months) to investigate filing for bankruptcy. I’m sure reading a few other perspectives would be extremely helpful for him.

I’ve got to help him figure out something because he’s had a pretty rough go of it recently, and because my liver can’t take too many more nights like last night.

He’s got until March 31st to formally respond to the lawsuit. Please help.

Okay. Let’s get real.

$7,500 grand plus a few odd thousand I’m guessing is nothing worth going bankrupt over. My advice for your friend?

1. Consider selling the car and buying a beater for like a grand, cash.
2. Face facts and face the lawsuit. Perhaps they are willing to settle for a portion of it. You can use money from the car sale to get it down by a bunch, then set up a payment plan for the rest.
3. Get a 2nd job.
4. Reduce expenses.
5. Get current on all debts.
6. Set aside a solid chunk every month to pay them down, starting with the highest interest one first.

He’s already living rent-free so between that and getting rid of the car debt, his budget should have enough wiggle room.

I’ve heard from people who were far worse off who paid off their debts in a reasonable amount of time. The key factor is facing this square on, with consistency and intensity.

For instance, this mother of three paid off $50k in debt on a $20k salary. If she can do it, so can your friend.