So I’m gonna do something I’ve never done before. I’m going to tell you how to try and AVOID having to file for bankruptcy. Things are pretty chaotic right now, finances are up in the air, and none of us really know how all of this will play out. If you want to avoid bankruptcy after all of this is done, then please take my advice.
- TAKE CARE OF YOURSELF AND YOUR FAMILY FIRST: Your first priority should always be yourself and your family members. None of us will get through this alone. If you don’t take care of yourself you won’t have the energy or ability to think clearly and act carefully. You’re much more likely to spend money you don’t need to when you’re hungry, angry, lonely, or tired.
- IF YOU ARE PAYING YOUR CREDITORS, PAY THE MINIMUM: It is hard for me to even type that. I hate the idea of only paying minimums on debts because it will cost you more in interest. But right now you need to be stockpiling your money. If you’ve been paying extra, that is wonderful, but set that extra aside for now. If you need it later you will be glad you had it. If you don’t need it later, you can always pay extra then.
- IF YOU CAN’T PAY YOUR DEBTS, PRIORITIZE WHO GETS PAID FIRST: Between credit cards, car loans, mortgage payments, student loans etc… there are probably a lot of people who want your money. If you’ve lost your job, or just can’t pay them all right now, you need to prioritize payments. Pay the things that are most important first. That means things like mortgages and car loans should come first. If you miss payments on your credit cards they will get pissy and call you, but if you miss mortgage or car payments, you could end up losing them.
- MISSING A MORTGAGE PAYMENT IS NOT THE END OF THE WORLD: First, let me say that if you are able to make your mortgage payment, then you should make that payment. The thought of missing a mortgage payment is terrifying to a great deal of people, but I promise you it isn’t the end of the world. Mortgage companies will not begin foreclosure for at least ninety days after the first missed payment. In my experience most mortgage companies won’t start the process until you are 6-12 months behind in payments. I understand it is scary to fall behind, but you the odds are that a huge percentage of Americans will miss mortgage payments, and I would be shocked if the government didn’t eventually require banks to engage in loan modifications as they did back in the great recession.
- LIMIT ONLINE PURCHASES: Amazon is super convenient, but the problem with that is that it makes it very easy to spend much more than you should. I’ve had multiple clients who have gone deep into debt due to online shopping addictions. And it truly can become an addiction. It feels great to push a button and the next day you’ve got a little present on your door! In times of boredom or stress shopping gives you something to do, and opening up the packages gives you that little hit of dopamine that makes you want to keep buying more. In order to avoid this, keep close track of how much you are spending. Don’t just hit “buy” and not think about it again. Keep a list somewhere of just how much you’ve spent, you’ll be surprised how quickly it adds up.
I hope some of those will be useful to you. We are in a brave new world, and it is scary, but we will get through it. The most important piece of advice I can give right now is don’t panic, yes it is scary to be in debt, but those problems can be fixed. Stay safe, stay home.