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Got Debt?


Do you have so much Debt that you are struggling to pay your bills every month, borrowing money from one credit card to pay another, doing without items necessary for you and your family in order to pay your bills?

If so, you may want to consider filing for bankruptcy. I know that is a very difficult decision to consider filing for bankruptcy relief. However, you may already be financially bankrupt and failing to acknowledge and take care of the problem may simply make matters worse.

Bankruptcy is a business decision, which you should make taking into consideration your best interests, just as your creditors made a business decision whether to lend you money in the first place. Many famous and/or successful individuals have had serious financial problems or filed bankruptcy including Redd Foxx, John Wayne (narrowly avoided bankruptcy), Harold Robbins, John Connally, John Wayne Bobbitt, Mark Twain, Rembrandt van Rijn, Morton Downey Jr., Jackie Mason, Kim Basinger, Toni Braxton, Eddie Fisher, Marvin Gaye, Andy Gibb, George Jones, Jerry Lee Lewis, Wayne Newton, Tom Petty, Richard Bach, Margot Kidder, L. Frank Baum, Burt Reynolds and Walt Disney.

Bankruptcy can help you get rid of debt that you are unable to pay or re-structure debt that you are having difficulty paying to make it more manageable. Although bankruptcy is usually damaging to your credit, it is possible with time and careful future management of your money to recover from having filed bankruptcy.

If you are feeling hopeless about your financial debt situation, but you are still re-paying your creditors, here are some things to consider in determining whether bankruptcy may be a good option for you.

* Calculate how much it will cost you to re-pay your current debt at your current interest and payment rates. This will help you to see whether there is light at the end of the tunnel and how far away it is. Consider your long term financial goals and necessities and how long they will be delayed by re-payment of this debt according to its terms.

* Consider whether it is realistic for you to continue making the payments on your credit cards. Having to borrow from one or more credit card(s) or from necessary living expenses to make your credit card payments every month is a sign that you are in over your head. Try making a budget and see if it is possible for you to pay your necessary living expenses and make the credit card payments without borrowing additional monies on a regular basis. You should include in your budget at least some savings to deal with unanticipated emergencies like a minor illness or car repair. Necessary living expenses include prescription medications. If you cannot set up a budget that will allow for these things, it is a sign that you have a problem and should consider your alternatives. Please also keep in mind, if you are right on the edge, many credit card companies have policies which allow them to increase your interest rates and/or payment amounts for virtually any reason they choose. In addition to bankruptcy, you may want to consider credit counseling or getting an additional job (if this is realistic).

* If you decide to go to credit counseling, treat is as an opportunity to become educated about the process. Make sure you understand how the credit counseling service gets paid, whether they get paid regardless of the success of your program and how long it takes for your creditors to start receiving the monies you are paying. It is important that you understand that many of the credit counseling agencies are supported, in part, by the creditors and have incentives to get you into a debt management program. The credit counseling programs work by negotiating concessions from your creditors such as adjustments to your re-payment requirements, reductions in interest, re-aging of your accounts, and Afair share@ payments to your credit counseling agency to help cover the costs of offering the service. If the credit counselor does not want to explain how they cover their expenses, this may be a sign that they are not a good service. You should be able to find a credit counseling service that will provide their services to you for free or for a very low cost, they should not be entitled to keep an entire month=s payments to your creditors under your debt management plan or other high fees in order to place you in a debt management plan. There are many programs, if you are not satisfied with the first one you try, try another one. It is important that you understand that being in a debt management program does have a negative impact on your credit and that is will be difficult to begin re-establishing your credit while you are in the credit counseling program. A credit counseling program that you cannot realistically afford will not solve the problem and simply delays the relief that bankruptcy can provide. However, for some people, credit counseling is a good option and you may wish to see what is available before seeing a bankruptcy attorney. The staff in this office has researched the credit counseling options and can give you some idea of what payments would be required to complete a debt management plan.

* Many clients want to negotiate directly with their creditors for new terms on their credit card accounts. This will sometimes work, particularly if you have very few accounts, but can be a frustrating and time consuming project. Most credit card companies do not appear to have found it cost effective to provide the staff to work with accounts that are not current. We do provide limited assistance in this regard for individuals who are not candidates for bankruptcy or who wish to negotiate with the creditors. You should also be aware that debt forgiveness outside of bankruptcy can result in income for tax purposes and create an additional tax obligation.

If you are feeling hopeless about your financial situation and behind on payments to creditors, you should seen an attorney right away. Since you are already in default to your creditors, they may have the right to take certain actions against you such as obtaining a judgment, taking money from your account or obtaining possession of collateral. Bankruptcy may help you prevent these actions by your creditors or lessen the damage that they do to your financial situation. For instance, many people do not understand that your car lender can take your car and still pursue you for the balance due on your loan after the car is sold, often for less that the value of the car to you.

In any event, our office offers a free initial consultation to discuss whether bankruptcy may be a good option for you.
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