ARE you debts growing faster than your income every month? Trying to pay what you can but feel like you’re running on a treadmill and not getting anywhere? Do you have that sick feeling in your stomach after realizing that you have gotten yourself in more debt than you can actually pay back?
If it’s any consolation, according to a recent survey, about one-third of households in this country are either just barely making it or are having trouble paying their debts each month. As of February, 2019, the Federal Reserve Board reports that the American consumer debt is now at a record $4 trillion! For the first time in history, average Americans owe more than they make. In the last decade, credit card debt has increased 81 percent while the average family’s income grew only by 9%! So how can people’s income keep up?
“ As of February, 2019, the Federal Reserve Board reports that the American consumer debt is now at a record $4 trillion!”
If you are in the situation I just described above, how can you avoid debt from creeping up on you? The banks and the credit card companies know that when income is short, most people will resort to loans and credit cards to make up for the shortage. This is how the banks and the credit card companies are continuing to get rich, of course, at your expense. Is this what you’ve been doing- using credit cards just to survive every month?
The problem with this, obviously, is that if your income is always short and you’ve become dependent on borrowing just to make ends meet each month, what you’re doing is putting a small “band-aid” on a giant wound. At some point, your credit cards will be maxed out and you will be bankrupt unless your income has also increased to be able to pay off all the debt that you’ve been accumulating.
Before this happens, you need to find a way to reduce your debts and monthly expenses so you are not “negative” every month. Now if your only plan of dealing with that situation at this point is, “I will just deal with it when that happens”, then what you have in your hands is a disaster just waiting to happen
Financial planners tell us that we should try to keep our debt-to-income ratio below 36% (about 28% for housing and 8% for other recurring debt payments). To calculate your own ratio, divide your total monthly debt payments by your total monthly gross income. In your monthly debt payments, include your mortgage, car, loan and credit card payments. What do you get? What I usually find is that some people are way above this amount, sometimes as much as 70-80%!!!! And then they wonder why they never have enough money for food, utilities and other basic living expenses.
This is the reason why a lot of people in debt are unable to qualify to buy a home even though they have always paid their bills on time- They simply have too much debt and the banks are not willing to give them any more. (I had a client in my office the other day who decided to file bankruptcy because his broker told him that he was better off filing for bankruptcy first to get rid of his debts before buying a house. Most people are able to buy a home if their bankruptcy is at least 2-3 years old.)
If your debts are out of control and you need help in figuring out what your options are, we can help you explore all your non-bankruptcy and bankruptcy alternatives. Bankruptcy, of course, should be your last option, not the first.
To schedule a free attorney consultation, please call us at Toll-Free 1-866-477-7772. We have offices in Glendale, Cerritos 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 thousands of 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.
