12 Apr Why Consider Bankruptcy If You Can Make Your Minimum Payments?
Many people call and say they aren’t really sure if they should be talking to a bankruptcy lawyer since they are making all their monthly payments on time, and their credit rating is good.
If you are making payments and have good credit, that doesn’t mean that bankruptcy is not an option for you. If you are not able to pay more than the minimum payments, it could be a long time before you are ever able to get out of debt and it will take a lot of hard work.
Bankruptcy can help to make the goal of a debt free life possible.
First, look at whether or not you really could pay off the debt you owe over a reasonable period of time. Make a budget for your living expenses, and see what is left over. If you calculate what it would take to pay back your debts over that period and you know you can’t possibly do that, then you should at least consider bankruptcy. For example, that period might be five years, which is a typical length of debt management programs. That length of time might not suit your situation.
Think about your life in the next few years and where you will be.
- What do you want to accomplish financially in that time period?
- Are you young?
- Do you have, or are you thinking of starting a family?
- Can you support your family and pay off the debt?
- Are you ill, and facing medical expenses?
- Will you be able to pay for your medical bills and pay off your debts?
- Do you want to buy a house?
- Could you save up for a down payment?
- Are you older or about to retire?
- Will you be able to work long enough to pay off your debts, and if so, will you be able to save up for your retirement too?
- Will you be able to live on your retirement or social security if you aren’t able to save any more money?
Bankruptcy can help people get back on their feet, either by eliminating unsecured debts in a relatively fast time (Chapter 7) for those who really don’t have money left over after payment of necessary living expenses, or by setting up a 3-5 year repayment plan (Chapter 13) that you can afford.
Sometimes a reputable debt management program is a good alternative to Chapter 13, but if you seek the advice of a bankruptcy attorney she will normally tell you if she thinks that is a good option for you. The thing to look at and consider is not whether or not you can make the monthly payments on your bills, but whether or not you can pay off the debt in a reasonable amount of time. If you go through your life carrying the same debt, never paying it off, but making the monthly payments and then running it back up, you will pay several times the amount you owe in interest and never get out of debt.
Latest posts by Susanne Robicsek, North Carolina Bankruptcy Attorney (see all)
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