Recently, there has been a resurgence of people looking for ways to become debt-free. I believe a lot of this is due to the publicity of the debt the US government continues to grow. Many Americans, have started taking a closer look at their own finances and realizing that they might have out of control debt problems. There are many websites like the one of Dave Ramsey and it touts the goal of becoming debt-free as the ultimate financial goal. Most of these programs are pushing the idea of becoming debt-free without filing bankruptcy. The problem is, many American’s debt has gotten so high that many have no other choice but to file for bankruptcy.
At the end of 2011, it was reported that the average American has close to $16,000 in credit card debt. When adding the interest rate into the mix, it’s looking highly unlikely that these average Americans will ever be able to get out of debt without the help of filing bankruptcy. The problem lies in the debt ratios and not really in the total amount of debt. If someone made $150,000 a year and had $16,000 in credit card debt, it’s pretty obvious they could budget themselves and take a little bit of pain to pay it off in a short amount of time. When someone is making $35,000 a year it becomes next to impossible because of their living expenses. Consequently, most of these people make the minimum payment just to keep their credit card accounts open. They don’t even realize it but they’re becoming enslaved to their debt.
It is possible to become debt-free without filing bankruptcy, but it takes discipline and capital. If someone doesn’t make enough money and have gotten themselves into some serious debt, outside of winning the lottery, the only thing that will get them out of debt is a bankruptcy filing. All the debt-free gurus tell their clients to avoid filing bankruptcy at all costs. Most of them will even admit that for extreme circumstances, extreme action is required and that’s where the individual should consult a bankruptcy attorney. I guess it really depends on who one goes to for their advice. A financial consultant will push budgeting, while a bankruptcy attorney will suggest a bankruptcy filing to eliminate the debt. It’s common for folks that are in trouble to consult a bankruptcy attorney hoping for an easy way out, only to find out that the attorney advises them that their debt problems are more of a budgeting issue and it’s possible to get out of debt without filing bankruptcy.
When considering how to go about becoming debt-free, one should gather up their monthly bills and figure out without charging any more on their accounts, how long would it take to pay off all their bills. As a rule of thumb, if it takes longer than five years it might be time to consult a bankruptcy attorney.