You’re struggling to pay back your bills, and much of it has to do with a few thousand dollars in credit card debt. Maybe you had an emergency situation and you had no choice but to put the charges on the card. Maybe your spouse simply went on a spending spree and you didn’t realize how far behind you were getting. Whatever the reason, you’re considering bankruptcy as a way to get out of the debt.
But does it really make sense? People often say that bankruptcy is a tool to use when the debt feels overwhelming, like you’re drowning in it. But if you just have $6,000 of debt on a credit card, is that really the same thing?
It depends on your income
The biggest thing to consider is your income. Overwhelming debt is different for everyone.
For instance, consider the fact that six out of 10 people who file for bankruptcy make less than $30,000 a year, which is under $500 each week. If you’re paying rent or a mortgage, you have to buy food for your family, you need to pay to keep the lights and other utilities on and then you have $6,000 of credit card debt, there’s simply no way you can cover all of that on $500 a week.
In that sense, your debt really is overwhelming. It may not seem like a substantial amount to someone who has $50,000 in debt, but it’s quite a lot for you and it can make life very stressful and financially difficult.
You also have to consider the interest rate on your credit cards. Even if you make the minimum payment, they’re going to charge you interest on everything above that remains. This may mean that your total owed increases by more than the minimum payment that you submitted. You’re paying every month, but you’re not actually making any progress and your debt is only getting worse.
In a situation like that, you may want to use bankruptcy as something of a reset button. It can give you a fresh start and allow you to address your debt in new ways.
How do you get started?
Once you decide that you do want to use bankruptcy, take the time to look into all of the legal steps that make it possible.