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Chapter 7 Bankruptcy Doesn't Have to Be a Last Resort


Time is of the essence

Bankruptcy may be better for you if it's not left to the last resort

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Most people think of bankruptcy as a “last resort” option for those whose finances are so dire that there are no other options. But financial guru Steve Rhode, known as the “Get Out of Debt Guy,” is shaking up this philosophy. He says that not filing Chapter 7 when you get in too deep with debt can be a million dollar mistake. Rhode writes, “the greater question to answer before diving into how to deal with your debt is to determine if you think you have a greater responsibility to repair the past or the future.” Rhode proposes (and we agree) that Chapter 7 should be a first and not a last resort.

A Different Way of Thinking

The idea here is that if you get in too deep with debt, you can try and make significant sacrifices to pay down your debt or get to the point where they're marginally manageable. But Rhode says roughly half of all plans to try and get debt under control will fail. And, he says that even if you “succeed” with a scrimp and save to get debt under control strategy, you may still be considered having “failed.” Sounds crazy, right? Let's dig in and consider this.

According to Magnify Money, 42.4% of Americans carry credit card debt averaging nearly $11,000 with monthly payments of around $408. This balance will take three to five years to pay off - more if you continue using your credit cards. Rhode challenges consumers to consider what else they could do with that money. If you invested that same $408, at the end of the five years, that's more than $28,000. After another 30 years, that amount will total roughly $412,000 depending on your rate of return.

Consider More Than Your Debt

Naturally, you want to honor the debt obligations you made. However, if doing so represents such a major sacrifice that you won't be able to save for retirement, you're doing yourself a terrible disservice. Imagine yourself being broke now because of your credit card debt and medical bills. Then imagine yourself being retirement age, broke, with no resources to fall back on, and your earnings capacity limited or non-existent. That puts you in a position of being a burden on your family and society. And all because you decided to muddle on through with your too-heavy debt load.

True, there is a cost to filing Chapter 7 bankruptcy. First, you'll have to pay the legal fees, but these are modest and are the equivalent to just a few months of your credit card payments. Second, you'll have to rebuild your credit score from the hit it takes from filing bankruptcy. But this is doable and, if you're struggling to make payments, are paying bills late and keeping cards maxed out, your credit is already taking a hit. Third, you'll have to let go of the idea that you should prioritize your creditors' well-being over yours. If you can afford to pay your bills without sacrificing your long-term financial well-being, then you should. But if you're on a path to wreck your financial future, Chapter 7 is something to consider sooner, rather than later!

To find out more about how a Chapter 7 bankruptcy can protect your financial future, call +1-919-646-2654 for a free consultation with a North Carolina bankruptcy expert. Contact the law office of John T Orcutt today for an appointment in Greensboro, Raleigh, Fayetteville, Garner, Wilson or Durham.

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