If you’re thinking about filing for Chapter 7 Bankruptcy or Chapter 13 Bankruptcy in Minnesota, then perhaps you’ve already determined that bankruptcy is the right option for you.
If not, here are 6 questions to ask.
1. Do you only make minimum monthly payments on your credit cards?
Do you only make minimum monthly payments on your credit cards?
If you can only afford to pay the minimum, it will take you many years to pay off your balance, and you’ll be paying mostly interest.
I often see credit card bills which say that it will take 20 YEARS to pay off a balance at the minimum payment.
Whilst it might mean that you have the money to make the minimum monthly payment on other credit cards, it’s not an effective way to pay back what you owe.
2. Would it take more than 5 years to pay off your debt completely?
Will your debt take longer than 5 years to pay off?
If so, can you:
- Get a pay rise?
- Work more hours?
- Reduce your monthly expenses?
If you’re not expecting any more income, or a reduction in other areas of your spending, and your debt will take more than 5 years to pay off, then perhaps filing for bankruptcy is the right option for you.
I talk to so many people who have spent all of their 20s or 30s trying to pay off debt from one financial misfortune. A person only has so many years when they can earn a good wage.
Why use them to pay debt when you need to save for retirement, buy a house, and put your children through college?
When the bankruptcy is done and they are back on track, my clients almost always tell me that they should have done it sooner.
3. Is your home is worth less than your mortgage?
Is the current value of your home less than you owe on your mortgage?
If your house is ‘under water’ – worth less than your mortgage, then you can’t sell it and move to somewhere less expensive, and use the profit to pay off your creditors.
You could do a short sale or foreclosure, but these will destroy your credit rating also.
Why not file for bankruptcy in Minnesota instead?
4. Do you have mortgage arrears?
Have you fallen behind on your mortgage payments?
If so, then perhaps you are in danger of losing your home, and don’t know what to do next. You are probably also paying late fees to the bank every month and harming your credit.
Perhaps you’re looking for somewhere cheaper to live, yet know that it means:
- You will need a second car so you can get to work
- You need to find the deposit for a new home
- You will need to pay for childcare instead of relying on family
Chapter 13 bankruptcy allows you to catch up on your mortgage over 5 years. Your mortgage company won’t charge you late fees for the on-time post-bankruptcy payments or write on your credit reports that your mortgage payments are behind.
5. Do you owe taxes?
Do you owe taxes?
If you owe taxes, then you’ll know already that there is no escaping them, and that the Minnesota Department of Revenue has a number of ways of ways to collect the taxes you owe.
If you can’t pay them because you don’t have enough money, can’t borrow money from traditional lenders, or from family or friends, then perhaps now is the right time to think about filing for bankruptcy in Minnesota.
Bankruptcy often discharges income taxes from a few years ago. If you have taxes, then you should definitely read our article about filing bankruptcy on taxes.
Bankruptcy is often cheaper and more effective on income taxes than an offer in compromise. It also works on both State and Federal income taxes.
For many people in this situation, bankruptcy is the right option.
6. Are you threatened by creditors?
Are you receiving threatening letters, phone calls at work or visits from creditors, and don’t know what to do to stop them?
Do you dread every phone call, letter and knock at the door?
Although it can be tempting to ignore, them don’t. If you haven’t spoken to your creditors yet, it’s worth a try. They can’t help you if they don’t know you’re struggling.
However, if you’re still being hounded and worrying about losing your home or car, or whether to make a credit card payment or put food on the table, then tit could be that bankruptcy is the right option, and we can help you.
Over the last 40 years we’ve helped over 40,000 people file for bankruptcy in Minnesota, and know that most people file due to things like divorce, unemployment, and medical conditions, rather than due to living a lavish lifestyle.
We understand that you’re doing everything you can to try and pay back your debts, but if we can help you, we will.