January and February are cold months. For those who overspent at Christmas they can be particularly harsh. Many people push their minimum monthly payments over the top with Christmas spending. By January they are hit smack in the face with the reality of how far out of balance they have gotten. What to do next is not easy, obvious, or intuitive and many people make the wrong choices. So, here are a few pointers:
- NEVER withdraw your exempt retirement savings to pay down or pay off debt. No one can reach those savings and take them from you and, once gone, you will not get them back before retirement.
- Unless a refinance offer is for much lower interest and you are willing to cut all of the credit cards that you pay off in half with scissors and not use them (ever) again, or at least until the consolidation loan is paid off, DON’T take out a consolidation loan.
- Cut back your living expense now. Buy store name instead of brand name. Do not build a wardrobe or buy the latest, make do with what you have. Use those Christmas gifts you just got.
- Do not borrow against your exempt homestead equity to pay off credit cards. No one can make you do that.
- Do not lie to creditors.
- Set up a cash flow budget. Include savings even though you can’t pay your bills. If you can’t pay your mortgage, car payments, utilities, food, transportation and other regular expenses AND pay minimums on your credit cards, consult a professional bankruptcy specialist right away so that they can help you to determine who your should or should not pay and what your options may be.
- Don’t give anyone permission to draft your account and don’t write anyone post dated checks.
When facing insolvency, you need to take control of yourself and your finances. This is America, there are no debtor’s prisons and we do not ruin people for having to go Bankrupt. But there is a right and advantageous and honest way to do so and a wrong way. Seek out helpful advice before you make costly or improper decisions.
This article is written by an attorney at Wyatt & Mirabella, PC. Always consult an attorney before making any legal decisions. To make an appointment today for a free consultation, please click here to contact us.