Expert Q&A: How to Avoid Bankruptcy
Dear Erica, I want to file for bankruptcy because I can’t pay my bills any more. Im about two months behind on most of them, maybe more. Im working right now, but my pay is very low just over $2,000 a month. I want to buy a house someday. I owe $22,000 on my credit cards. My question is this: When I do the bankruptcy, will they take my car and my daughters car? I have two cars one for me and one for my 19-year-old. I bought mine four years ago and only have a few months left on the note. I bought my daughters car new last year, and I pay $430 a month. Im barely keeping my head above water and I dont know where to turn. Shanice
Dear Shanice, I must say, my first thought isnt what a lender could claim if you were to file for bankruptcy, but what you should claim from your daughter. And that’s the car of yours that she’s driving.
It doesnt take a mathematical genius to figure out that the vehicle you purchased for her was and is totally beyond your financial means. The payment alone is sapping nearly a quarter of your income!
Think about it this way: If you had the $430 back in your bank account, you’d have nearly enough to meet the minimum expected payment on your credit card debt. 3 percent of a $22,000 balance is $660. That means you’d only be shy $230 which I bet you’d be able to make up when the car that you drive is paid off in a couple of months.
Though your daughter won’t be happy, I strongly suggest either taking the car back and selling it or having her assume the payments so you don’t have to.
While the above recommendation should solve much of the problem, you may still be wondering if discharging your debt is a good idea for you. And I don’t think that it is.
I am not opposed to bankruptcy at all, and, in fact, I think its fantastic under the right circumstances. However, it is a last resort option, and because you do have a way to pay your bills, I think you should. Besides, you might very well lose property including one of the vehicles.
Other ways to rise above the debt-wave:
1. Work more or spend less. Explore ways to increase your income with a second job, overtime hours or by reducing expenses. If your daughter is living with you, is she paying rent? Ask her to contribute to the household. Even a few hundred dollars can relieve some of your burden.
2. Negotiate with your creditors. Look, the last thing they want is for you to walk away from your balances by declaring bankruptcy. Maybe they are willing to give you a break so you can pay the money back at your own pace or even at a discount. You need to talk to them and see what they’ll do for you. Call today.
3. Get counseling. A good, nonprofit credit counseling organization will review your budget and help you deal with what you owe. This can mean paying your creditors with their debt management plan, where you enjoy an interest rate break and the lenders receive 100 percent of their money back.
4. Modify your homeownership goal. To buy a home in today’s market, you’ll need excellent credit, steady employment and a substantial down payment. At this stage, all you have is the job. However, by becoming debt-free, resuming on-time payments and saving some cash, you can turn it all around. Many credit counseling organizations also have first-time homeownership programs too, so if you do make an appointment, ask about that.
You can do this, Shanice. Drowning is not an option.
Similar Posts:
- How Do Personal Bankruptcy Laws Protect You?
- Before Giving Up on Debt, Weigh Your Options
- Top 10 Bankruptcy Filing Errors That Can Halt Your Application
- Comparing desperate options: bankruptcy vs. debt negotiation
- What Happens When A Business Files Chapter 7?
