Take an honest look at your current situation. Write down all of your living expenses such as rent, food, clothing, medicine, insurance premiums, utility bills, vehicle related expenses (such as maintenance and gas), recreation, and all of your other ongoing monthly living expenses. Then, write down all of your monthly debt payments each month such as your mortgage payments, car notes, credit card bills, and other installment payments on your debt. With your current income, are you able to timely pay your living expenses and debts each month? Or, are you going into the hole each month and “robbing Peter to pay Paul?”

If you are “robbing Peter to pay Paul”, is this likely to be a temporary situation? For example, have you (or your spouse) lost a job recently or had some other loss of income? If so, how quickly do you think you might be able to replace that lost income? Can you trim expenses in some way to offset the loss in income? Is your trouble due to  an unexpected increase in your expenses? Do you have enough savings or other resources to offset the lost income or cover the unexpected expense? If so, it may be best to use those resources to get you through the temporary crisis.

Be very careful about borrowing more money to address your situation. For example, if you are a homeowner, you may think it a good idea to borrow against the equity in your home to pay off credit card debts. This may sound good because the interest rate on a home equity loan will almost certainly be substantially lower than credit card interest resulting in big savings to you. But by doing this, you convert credit card debt into a mortgage debt. If your situation continues to improve, this is not likely to be a concern. However, if your situation does not improve, you are worse off than you would have been had you avoided the home equity loan in the first place. Why? Because the mortgage debt you created is secured by collateral, i.e., your home. The credit card debt you paid off was general unsecured debt. General unsecured debt is the easiest type of debt to adjust or eliminate altogether should you need to file a Chapter 7 bankruptcy or a Chapter 13 debt consolidation case.

If it looks like your situation might be more than a temporary situation or if you do not have sufficient resources to get you through, it’s time to consult with a competent and experienced debt relief attorney. Don’t wait until something bad happens or is just about to happen. Delay in these situations usually means fewer options and possible loss of property. A competent and experienced debt relief attorney will review all of your options with you and help you determine if you really need to seek legal debt relief in the form of a Chapter 7 or Chapter 13 case. Sometimes, there are other options available to you to avoid filing a formal debt relief case and these options can be discussed with the attorney as well. Our attorneys will meet with you free of charge to assess your situation and discuss all of your options with you. After that consultation, you can decide which course of action, if any, you wish to take.

For over twenty years, our lawyers have been representing people in Alabama, Mississippi and Tennessee effectively and permanently deal with their financial challenges. We can help you too.

Bond & Botes, PC
Written by Bond & Botes, PC

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