We receive dozens of phone calls each month from people who have a lot
of credit card debt and are able to make at least their minimum monthly
payments. Still, they feel that they will never pay these debts off. They're
right, sort of. It is well documented that paying only the minimum monthly
payments on even a small credit card balance can take decades to pay off
and cost thousands of dollars in interest payment. Still, many people
in this situation feel
bankruptcy cannot help them (after all, they are able to "pay" their bills).
However, people who can only afford the minimum payment of their credit
card(s) are precisely the people who should consider filing bankruptcy.
Chapter 13 bankruptcy is the answer. When you file a Chapter 13 bankruptcy, your bills are essentially
consolidated into one payment. Your one monthly payment is paid to the
Chapter 13 Trustee who, in turn, pays your creditors.
By filing a Chapter 13, the interest on your credit cards stops!
So, basically all of your monthly payments can go towards the principal
amount you owe on your credit cards (the Chapter 13 Trustee charges a
small administration fee and your attorneys fee may be included as well).
Chapter 13 plans typically last from 3 to 5 years. So, once you file a
Chapter 13, you can point to a specific date on a calendar when you will
have paid off all of your credit card debt and be debt free.
Here's an example. A client of ours in her late 30s had approximately
$60,000.00 in credit card debt with an average interest rate of 15.9%.
She was able to make the minimum monthly payments of approximately $1,200,
but that's it. If she stayed on that track, it would have taken her
57 years to pay off the debt
(assuming she incurred no additional charges and made only the minimum
payment), and cost her
$116,466 in interest payments!
She tried debt consolidation but that didn't work. We devised a Chapter
13 plan for her where she is paying approximately $1,100 each month to
the Chapter 13 Trustee. She'll be completely debt free in less than
5 years and saved over One Hundred Thousand Dollars. And, as you can see
from this example, her monthly payment to the Chapter 13 Trustee is less
than the total of her previous minimum monthly payments.
In our opinion, the example above was a "no-brainer." Filing
Chapter 13 may well be the smartest financial decision she will ever make.
She didn't think bankruptcy could help her, but called us because
a friend told her we might be able to help. Now, she is paying her creditors
back in full and will be out of debt in a few short years instead of paying
on it for the next 57 years.
So, if you are in a similar situation, or you do not think bankruptcy can
help you, please speak to an experienced bankruptcy attorney. There is
a lot of bad information out there, so talk to someone who has the knowledge
to help you get out of debt.