How can you decide when bankruptcy just isn’t right for you?
First, give yourself a financial checkup. Many people run into trouble when their credit cards get to be more than they can afford. Ask yourself these questions:
Are you making only the minimum payment on your credit cards each month?
Are you using your credit cards to pay for necessities, such as food and medicine, because you don't have the cash?
Are you using your credit cards to get cash advances for normal expenses?
Are you making your monthly payment after the due date?
Are your credit card balances more than your liquid assets?
If you answer "Yes" to two or more of these questions, you may be headed for trouble.
Medical problems, separation and divorce, and job loss or job change are the biggest causes of bankruptcy. Maybe a consolidation loan is the right move. Maybe tapping into your home’s equity is best. Only you can make that decision, but before you do it’s important that you do the following:
Carefully review the terms of any new loan.
Determine what your monthly payment will be under the new loan, and whether you can afford to make those payments.
Make sure you will be able to make the new payments even if you are unemployed or unable to work for a six-month period of time.
Take out only the amount needed to pay off your other debts.
Cut up all of your credit cards after you pay them off—all of them.
Not sure if bankruptcy is right for you? Take 30 days and follow these three easy steps:
Know where your money is going: Keep track of all your everyday spending. Buy a small, pocket-size notebook, and write down everything you spend for a week or so. Literally. Write down every penny. Record convenience store purchases, automobile expenses (gas, parking, & tolls), meals, tips, money for coffee, etc. You may be shocked at how much of your money goes to different types of small expenses. One client realized that she was spending over $1,000 a year just on the cup of coffee she bought each morning on the way to work.
Develop a budget: Once you know where your money is going, create a budget by examining your spending patterns and looking at ways of maximizing your available resources. Many expenses may need to be cut back until spending is brought under control and bills are paid.
After expenses have been reduced and maximum spending levels have been identified for each budget category, the remainder of your available funds should be earmarked for payments to your creditors.
Plan for major expenses: It is important to establish financial goals in the same way you have probably already developed personal, educational, or professional goals. Whatever your goals, write them down. Identify a time frame for the accomplishment of each goal and the monthly amount needed to reach each goal.
You obviously want to repay all debts according to the terms of your agreements. Be on the lookout for obligations that contain additional costs, such as late payment charges, overlimit fees, and higher interest rates. Since these obligations will wind up costing you more, they should probably be identified as top priorities and paid first. Some of our clients rank their debts by interest rate, pay the minimum payment on all but the highest interest rate, and pay larger amounts to reduce the highest interest rate debt. When this debt is paid, they move on to the next highest interest rate, and so on.
If you find yourself in a real bind, or need more information, call my office at (301) 924–4400 and ask Jackie, my paralegal, for an appointment. Let me help you restructure your finances, schedule workout arrangements and, if necessary, advise and represent you in bankruptcy.
