“HOW can I pay my creditors when my income is not even enough to cover my basic living expenses?’. This is a question that I hear everyday from people in my bankruptcy practice. We are living in tough times. Some people resort to more borrowing to make up the shortage in income. So they are using credit cards to pay for groceries, gas and sometimes even their house payments. This may sound like a quick fix but remember that it’s only temporary. Once you’ve maxed out your credit cards, you will be worse off financially. So what do you do if you’re in the situation I just described above?
There is no doubt this can be depressing and frightening for a lot of people especially if you are facing a financial crisis for the first time in your life. And if you are overextended on debt, it becomes a lot more difficult to dig yourself out of the financial hole you’re in because while you’re already worried sick about your monthly living expenses, you’re also afraid of what creditors may do to you once you stop paying them.
I always tell my clients that the first thing you need to do in this situation is to prioritize how you spend your limited resources. For example, if you have a home with 2 mortgages, 5 credit cards, a school loan and an unpaid property tax bill, which one do you pay first when you don’t have enough money to pay for everything? First of all, it is important to cover your basic necessities before you pay any creditors. That means you need to make sure that you have enough money for rent or mortgage payments, food, car payments and utilities. You need to cover these basic needs first in order survive what you are going through.
Next, you need to find a way to reduce your expenses. I know this is not easy but it’s a must. Maybe you need to cut back on your food expenses. Maybe you can get rid of a vehicle that you’re paying on that you can live without. Stop buying clothes or household items that you don’t need. To manage your money effectively, you need a monthly budget. Start by putting down on paper every single monthly expense you have no matter how small. Do this for at least a month and then review your list. You need to keep track of every dollar that you spend. You may be surprised to find out how much you spend on certain things.
Lastly, keep in touch with your creditors. Do not ignore your creditors but rather, you need to communicate with them and see if you qualify for a settlement, reduced payment or any kind of forbearance until your financial situation improves. Think about it. If you refuse to answer your phone or open your mail, creditors will eventually have no choice but to sue you if they can’t get a hold of you. Once they get a judgment against you, your situation will be worse because they can now garnish your wages and take the money in your bank account.
If there is no other way out of debt except to file bankruptcy, you need to take immediate action so that you can change your situation as quick as possible. Call my office and schedule a free consultation so that I can help you explore your options- Toll-Free 1-866-477-7772. We have offices in Glendale, Cerritos, West Covina and Valencia.
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None of the information herein is intended to give legal advice for any specific situation. Atty. Ray Bulaon has successfully helped over 4,000 clients in getting out of debt. For a free attorney evaluation of your situation, please call Ray Bulaon Law Offices at TOLL FREE 1-866-477-7772.