Keep Making Minimum Payments or File Bankruptcy and Start Fresh?

Keep making minimum payments to creditors or file bankruptcy and obtain a fresh start doesn’t have to be a confusing question to answer. People typically want to repay the debts they owe to the credit card companies rather than filing for bankruptcy. However, paying the minimum payments can place people further in debt. For instance, making minimum payments won’t allow people to pay their way out of their credit card debt. Instead, by paying only the minimum payments, it ensures that the money spent on the debts will eventually reach two to three times the amount of the initial purchase, according to Legal Helpers. This means the dinner people charged on their credit card can cost double or triple the original amount.

Minimum Payments is Akin to Paying Nothing

Granted, minimum payments isn’t like ignoring credit card debt and letting the accounts go into default. However, people who continuously make minimum payments are only paying the principle amount they owe. Therefore, instead of making minimum payments, people will have to make more than the minimum payment to eliminate their credit card debt.

Bankruptcy Can Help People Repay or Eliminate the Debts

People who decide bankruptcy is their best option may be behind in other bills besides credit cards. For instance, they maybe facing disconnection notices from utility companies or behind in their mortgage payments. Thus filing for bankruptcy can help people catch up on their bills or eliminate them all together. Also, bankruptcy provides people with automatic stays. This means that they have legal protection from any creditor who wants to pursue lawsuits, wage garnishments or disconnect utilities such as electric, gas or water.

Types of Bankruptcy People Can File

The U.S. Bankruptcy Court allows people to file bankruptcy based on their income. For instance, anyone with regular income can file for chapter 13 bankruptcy. This means people can take three to five years to repay their creditors at a minimum amount set by their bankruptcy repayment plans. Chapter 7 bankruptcy, on the other hand, wipes people’s debt away. Thus, there are no more minimum monthly payments to make. Usually, chapter 7 is completed within three to six months.

Consult a Bankruptcy Attorney

People considering filing for bankruptcy or continuing to make minimum payments should contact bankruptcy attorneys. The attorneys can advise individuals on the bankruptcy process, explain any alternatives to bankruptcy or ensure people are eligible for bankruptcy.