Should You Try to Pay Off Your Debt on Your Own, or Just Go Bankrupt?

In a world where financial obligations are a constant, the issue of debt management comes to the forefront. One of the most challenging decisions concerning this matter is whether to attempt to pay off debt independently, or consider filing for bankruptcy. This issue demands careful consideration, given its potential impact on your financial future.

Understanding Debt and Bankruptcy

Debt is an amount of money borrowed that is expected to be paid back with interest. Bankruptcy, on the other hand, is a legal process where you declare that you cannot pay your debts. It can provide you with a fresh start, but also comes with serious consequences.

 

The Dilemma: Pay off Debt or File for Bankruptcy?

This decision is often difficult due to the complexity of the situation. Each individual’s circumstances are unique, and there’s no one-size-fits-all solution.

Evaluating Your Financial Situation

Before deciding on a course of action, it’s crucial to accurately assess your financial situation. This involves checking your monthly income, expenses, total debt, and the interest rates on your loans.

The Debt Scenario

Let’s consider a hypothetical situation where an individual has total debts amounting to $30,500. The minimum payments per month sum up to $420. If they can allocate $800 per month towards debt payments, they could clear their debt in approximately 45 months. This strategy is effective, provided:

 

  • You can dedicate $800/month for debt payments.
  • You have job stability for the next 45 months.
  • However, this may not be feasible for everyone.

 

The Bankruptcy Scenario

Take for instance a person with a net income of $2,366 per month, with unsecured debts amounting to over $61,000. If they were to follow the same debt repayment plan as above, it would take them over 90 months to clear their debts. In such cases, considering bankruptcy might be a better option.

Choosing Your Path: Independent Debt Repayment or Bankruptcy

Budgeting and Expense Cutting

Regardless of your choice, budgeting and cutting expenses is vital. Creating a budget can help you find ways to allocate more money towards your debt repayments.

Time Frame for Debt Repayment

However, if repaying your debts within a reasonable time frame isn’t possible due to your financial circumstances, considering alternatives might be wise.

Seeking Professional Help

For larger debt problems, professional assistance might be necessary. There are different avenues for debt relief, which include getting help from family, a debt consolidation loan, or filing for bankruptcy or a consumer proposal.

In Conclusion

The decision between trying to pay off your debt on your own or to go bankrupt is a significant one. It’s important to consider all factors, including your income, expenses, total debt, and job stability. Remember that it’s okay to seek professional help when needed.

Whether you choose to pay off your debts independently or to file for bankruptcy, remember to always make informed decisions and seek professional assistance when necessary.

If you’re looking for advice on managing your debts, our team of experienced professionals can help. Contact us today for a free consultation.

Find Your Personal Debt Relief Solution

Licensed Insolvency Trustees are here to help. Get a free assessment of your options.

Discuss options to get out of debt with a trained & licensed debt relief professional.