Pre-Bankruptcy Alternatives? Choosing Who to Pay

As a bankruptcy attorney in Asheville NC, I speak with people daily about how they are deciding which creditor to pay first when their financial situation becomes strained.  Frequently, the loudest creditor is the last one my potential clients should be paying. 

Peace rarely is achieved by making 'minimum' payments to debt collectors.

Peace rarely is achieved by making ‘minimum’ payments to debt collectors.

Credit Card Collectors

When a credit card bill goes unpaid, many accounts are automatically transferred to a debt collection company.  The collector’s job is to get that client to write a check.  Unfortunately, these companies often resort to threats of a lawsuit, repeatedly calling the client or their friends or family members, or acting as if they are trying to help that client out.  Frequently, the only way a collector can actually get money is by convincing that person to write them a check.  Read what the Federal Trade Commission says about stopping the collection calls here.  There is no wage garnishment in North Carolina for credit card or medical debt.

Who Should You Pay First?

Take care of current living expenses first.  Health care, food, and other necessities of day to day living should be paid before credit cards.  Then, pay all your utility bills, home, and car payments.  There is wage garnishment in North Carolina for federal debts, so tax liability and student loan debt comes next.  If there is still money in your budget left over, that is the time to consider paying back credit card debt (and also time to consider filing a bankruptcy case instead).

Do Not Use Your Retirement Money

Retirement money is exempt, meaning creditors cannot take it to pay off debts they are owed.  Before dipping into these funds, figure out your other options by consulting an experienced bankruptcy attorney or debt relief agency such as Ontrack Financial.  If you live in Western North Carolina, I would be pleased to sit down with you during a free, initial bankruptcy consultation.

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