New Year’s Resolution: Taking Control of Your Debt

Posted by William Kain on December 12, 2018 at 10:25 PM
William Kain

Many people make New Year’s resolutions to exercise more, eat healthier, or be kinder to others. But what about resolving to address your financial situation? A lot of people facing financial stress and debt tend to sweep it under the rug. It may feel so overwhelming that they think there is nothing that can be done about it. This is not the case, however, as our experienced bankruptcy attorneys have helped many people overcome even the most serious financial situations. The following are only some debt-related resolutions that can make for a happier 2019.

Face Your Debts

Many people with debt have no idea how much they owe. They throw the statements away, as it can be too stressful to consider the total amount. However, if you are going to do something about your debt, you need to know how much you have. Take out all of your statements for credit cards, student loans, mortgages, auto loans, medical bills, and more. Add up the total amount of debt, as well as the total monthly payment amount. Do you have enough to make all the necessary payments? If you do not, you may need to consider other options.

Increase Income/Reduce Expenses

Two ways to increase your ability to make your payments and still have enough leftover for living expenses are to either increase your income or reduce your expenses. Can you take a part-time job to earn extra money? Work overtime at your current job? Seek a job that may pay more? We know that not everyone has the time and flexibility to increase their income right away, so the other option is to reduce your expenses.

Do you allow yourself one or more non-essential purchases each month? Are you planning to take upcoming vacations that are unnecessary? Do you eat out on a regular basis instead of bringing your lunch to work or cooking dinner at home? There are many ways you can steadily reduce your spending without sacrificing a good quality of life. If you don’t already have a budget, your resolution should include making one - and sticking to it.

Learn Whether Bankruptcy is an Option

In some cases, adjusting a budget will not be enough to allow you to pay your debts. Maybe you were injured, and you have piles of medical debt your insurance did not cover. Maybe a household member lost their job, and you needed to use credit cards to cover even the most basic expenses for months, resulting in excessive monthly payments and inflated balances. There are many reasons why debt can become impossible to pay that are often beyond our control. In these situations, you shouldn’t wait to discuss your situation with a skilled Minnesota bankruptcy lawyer to learn whether bankruptcy is right for you.

While you may decide that it is now your resolution to file bankruptcy and wipe out your debt for the New Year, there are important considerations when in this situation. The following are two things to remember if you’re planning on bankruptcy in 2019, and you should go over any concerns regarding your specific situation with your bankruptcy attorney.

Don’t rack up credit card debt - A successful Chapter 7 bankruptcy will discharge all of your credit card balances, meaning you will no longer be obligated to pay them. With the holiday season here, you may be tempted to buy lavish gifts, take a trip, or make other large purchases with your credit card - after all, that debt will be discharged soon, right? This is usually not the case.

Using credit cards without the intent to pay the balance (such as expecting a discharge) is considered to be fraud. In some situations, certain luxury purchases or cash advances can be seen as an attempt to defraud creditors, and your creditors may be able to fight the discharge. We will discuss this issue further in our next blog post.

Consider your income - Chapter 7 bankruptcy requires that your income (minus expenses) be lower than the median income for households of your size in your state. To make this determination, the means test consider your average income for the past six months, including many different types of income. If you receive an end-of-the-year bonus, it may skew your monthly income to appear higher than it truly is, and you may not be eligible for Chapter 7 right away. An attorney may be able to account for this bonus on your bankruptcy petition, though this is something you should discuss with your lawyer.

Discuss Your Options with a Minnesota Bankruptcy Lawyer Today

The Minnesota bankruptcy lawyers of Kain & Scott hope that you have a healthy 2019. If you would like to discuss possible solutions to your financial struggles, please call our office at 800-551-3292 or contact us online to schedule a free consultation.

Topics: Debt, Credit card debt, Chapter 7 Bankruptcy, Chapter 13 Bankruptcy