Debt is something which unfortunately many of us will encounter throughout our lives. From the moment we enter the education system we begin to accumulate a series of debts which follow us into our adult lives. The moment that we leave high school and enter into the college or university system we are again faced with increased financial obligations, and then the moment that we complete our education we are faced with mortgages, cars, taxes and credit cards.
Many people find themselves unable to pay back what they owe and are forced to ask themselves if they would be better off filing for bankruptcy – a moral obligation which opens up a variety of questions which can only be answered by the type of person that you are, your ability to pay back the debt, and exactly how much you owe.
What is most important however, is that you worry less about your moral obligations concerning debt and instead focus on what is going to be best for your financial future.
At what point should I file for bankruptcy?
When faced with a mountain of debt and considering whether or not you should file for bankruptcy, the first question you should ask yourself is “can I currently afford the minimum payments required on my debt obligations?”. If you answer no to this question you should seriously consider filing for bankruptcy. The reason for this is that it is the best decision you can make financially at this point. If you cannot currently meet your payment obligations, and you have tried all the various types of debt reduction services, you will be wasting your hard earned money on something that you cannot pay back.
Consider this, if your monthly credit card payment is $300 yet you can only afford $200, you are best to have this credit card debt discharged in the courts so that you can start focusing on consolidating the debt that you can afford and to relieve your emotional stress. If in doubt though, you can always consider consulting a lawyer or credit counselling agency.
Can I negotiate with my creditors?
If you would prefer not to file for bankruptcy you can always give your creditors a call to see if you are able to negotiate your payments with them. However, it is probably best that you consult a professional in order to make the call. In that case, a credit counselling agency should be able to negotiate a new payment plan that you can afford and try to reduce the amount of fees and interest rates which you are currently paying against your debt.
Alternatively, you can consult a bankruptcy lawyer who may be able to negotiate a lump-sum payment with the creditors in exchange to close the file. For example, if you owed $15,000 to the creditor, the bankruptcy lawyer may be able to negotiate that if you pay $8,000 today the debt will be resolved. However, in order to follow this route you would need that $8,000 upfront.
You may also consider contacting a debt consolidation company who will instruct you to send them a monthly payment while they manage the debt with the creditors. The downside of this option is that companies like these generally charge very high fees.
What are my moral obligations with my debt?
The fabric of society is held together with the morals we are each taught from birth, but sometimes these morals may conflict with our ability to meet our financial obligations. Morally speaking, if you tell someone that you are going to pay back the money that they lent you, you will pay it back. Ironically, the creditors from which you borrow money from expect you to have morals, but exhibit very few of them themselves.
If you have been late on your credit card payment, you would know that banks double your interest rate – even if you are only a single day late on your payment! Overdraw your bank account by a measly $2 you’ll charged several bounce fees of $35. Even tax preparation companies show little moral obligation when they are happy to charge a triple digit rate so that you can receive your tax refund a little early.
It is unfortunate that banks, credit card companies, and even mortgage lenders would openly demand that you meet your moral obligations with them while they exhibit little (if any) and target the less fortunate in our society. In fact, these companies will not hesitate when it comes to forcing you into bankruptcy if it means that they can get out of their obligations with you.
In saying that however, you are still expected to act responsibly with your financial obligations and do your best to rectify any debt you may have with your creditors. More than one million Americans file for bankruptcy each year, so do not feel ashamed in taking the option for a financial second-chance. Everybody deserves a second-chance, especially when it comes to their finances.
Debt is ingrained into our society so there is absolutely nothing to be ashamed about when it comes knocking on your door, especially if the debt is the result of something out of your control like unemployment, injury or even illness. Even if your debt arose due to you perhaps not acting as responsible as you should have with your finances, consider the option for filing for bankruptcy your second chance to behave responsibly in the future.
In closing, you do have a moral obligation to pay back your debt to your creditors and protect your future financially, so if this means that you have to ask yourself “should I file for bankruptcy”, don’t feel guilty when you decide to take a route which is supported by the Government and paid for with your hard-earned taxes.
Always remember, if guilt does arise through taking this route, there is nothing within bankruptcy law which prevents you from making payments against your debt anyway. You may no longer have an obligation to pay your debt, but you may still have an ability to do so. The big corporations may not display their moral codes of conduct very well, but remember that each of us plays a small part in upholding society through our morals.