In Bankruptcy Information, todays question

It’s the new year and many of us are making new year’s resolutions. At the top of the list are get out of debt and lose weight.

I can’t help you with losing weight. That was one of my resolutions in 2016, to lose 10 lbs. I only have 15 lbs. to go. But I can help with your goal of getting out of debt.

The first thing you need to do is figure out how much debt you have. So gather up all of your statements and list everyone you owe money to. This includes your mortgage(s), car payments, student loans, credit cards, doctor bills — anyone you owe. List each debt separately with the total owed. Set that aside for now.

Next, itemize what income you have. This includes wages or salary from your job, Social Security payments you might be getting, retirement benefits, rental income, alimony or child support you receive and anything else that comes in regularly each month. Put this number on a piece of paper under the heading “Income.”

Now figure out your monthly expenses not counting the debts on the list you just made, unless directed here.

This list will include your mortgage, car and student loan payments but nothing else from the list of debts. It will also include the following:

Utilities (gas, electricity, water, sewer and garbage collection)

Monthly budgeted amounts for property tax and insurance on your home if not included in your mortgage payment

Food and personal care items

Laundry and dry cleaning

Transportation (gas, oil, maintenance — not your car payment)

Medical and dental

Recreation (movies, dining out, magazines, etc.)

Birthday and Christmas gifts

Charitable contributions

Insurance not deducted from your pay or included in mortgage payments (car, life, disability, etc.)

Back taxes you might owe

Alimony or child support you owe

Don’t guess at these. Spend some time going back through your checkbook or credit card statements to see how much you actually spend. You’ll be surprised at how much money dribbles away when you get a donut and a drink at the convenience store, go out to eat instead of cooking dinner, on doctor and dentist bills and the like. Once you’ve got your list, add them up.

Now compare your monthly expenses against your income. If your income is less than your expenses, there are only two things you can do: increase your income or cut back on your expenses. If you want to get out of debt, you have to have something left over each month after your living expenses are paid to pay against the debt. If you just can’t reduce your expenses or increase your income to where you have that excess, it might be time to contact me.

If you do have something left over each month, good for you! Now you’ll want to see roughly how long it will take to repay your debt with that amount of money each month. Divide your total debt (excluding the car, mortgage and student loan payments that are part of your regular monthly expenses) by the amount you have left over. The result is the approximate number of months it will take to pay off your debt. The actual number will be higher because those debts bear interest, but this will give you a rough idea.

If it looks like you can get out of debt in five years or fewer, it’s probably worth doing that rather than file bankruptcy. If it will take you over five years, bankruptcy might be a better option for you. I can help you decide what options you have and which are the best for your situation. Contact me if you have questions.


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