Are Your Debt Problems Getting Worse Every Month?

If you are searching for debt reduction solutions, you’ve probably been inundated with advertisements for various debt management programs, companies, and solutions. The choices seem confusing to the average consumer. The truth is that every situation is different and what may work perfectly for others is not necessarily going to work the same way for you. So, what do you do before your debt problems get worse?
If you know your finances are a mess and you’re struggling with a mountain of debt, then you need to create a plan of attack to help you get rid of your debt properly. If you’ve ignored your debt problems for a while and you are now at a point where creditors have taken legal action to collect what you owe, self-help debt reduction may be out of the question, and you may need to take the legal steps necessary to protect what you have.
Many times, people come to our office with wage garnishments, bank levies or a lien filed by a creditor against their home, and they don’t know what to do to stop it. These are the situations where filing bankruptcy may be the only way to get out of debt as quickly as possible and to protect yourself from further creditor actions.
It is important for you to have an accurate picture of your current financial situation before you embark on implementing a solution. This means understanding exactly how much income is coming in and how much you pay out in expenses. As a starting point, write down your outstanding balances on all your current debts and add up the totals. The total figure might shock you at first but it’s important for you to know where you’re starting to create a plan of attack. By doing this, you will see what percentage of your monthly net income is going to just pay debts every single month. In most cases, anything over 25% will be excessive.
Question: If you didn’t have to pay this amount every month (if you were debt-free), can you imagine what you can do with this money? I talk to a lot of people who tell me that they don’t want to file bankruptcy because they want to buy a house someday. And yet when I ask them how much money they’ve saved for the down payment, I find out that they have saved very little or nothing at all. FACT: Most people who are in debt can’t even put aside a couple of hundred dollars a month because their income is spread out too thin between paying for their living expenses and paying their debts. So they just live paycheck to paycheck and can’t put any amount aside for emergencies, let alone save money to purchase a home someday.
OK, going back to tallying up your debt amounts: Alongside each debt balance, write down the amount of interest you’re being charged and how much you’re paying each month on that debt. Sadly, most people who are buried in a mountain of debt have lost track of what they owe. And because they have stopped paying their creditors, the bill collectors are now demanding the full amount which, of course, makes it even harder for the person to catch up on their delinquent debts.
If you’re on a very tight budget or if your income is not even enough to cover your living expenses, it may be impossible for you to get out of debt without having to file bankruptcy to wipe out what you can no longer afford to pay. For many people, this may be the only realistic way to get rid of debts hanging over their head instead of trying to pay their creditors slowly or even worse- not paying them and having to face the legal consequences that follow. If this describes your situation, bankruptcy could be a big turning point in your life. No one ever wants to file bankruptcy, of course. But when you’re stuck in debt with no way out, it may be the only opportunity available to you that can help you regain control over you finances. Bankruptcy is a beginning, not the end.
Ray Bulaon is a bankruptcy attorney and business debt mediator in Valencia who has successfully helped more than 5,000 clients in getting out of debt. For a free consultation, call 866-477-7772 or 661-775-4880. Due to current COVID restrictions, consultations are available by phone or video.