Many people with debt wonder if bankruptcy is the proper solution for their situation.  Unfortunately, there are several myths about bankruptcy and some people think you need to be behind on your payments before you can file. The reality is that more people need to file bankruptcy long before they know it.

The number one warning sign that someone has too much debt is when the total of unsecured debt is more than 1/3 of gross annual income. Unsecured debt is credit cards, personal loans, lines of credit, medical bills, etc. When unsecured debt is more than 1/3 of gross income, the debt will never be paid off. At this point, you are only servicing the debt; i.e., making interest payments but not reducing the principle. Suppose you make $100,000 per year and your credit card debt is $50,000.  This is more than 1/3 of your gross income, and with this debt-to-income ratio, you will never pay off the debt-you’ll only make interest payments.

Bankruptcy is a financial opportunity to cure a debt problem. Imagine if you did not have credit card debt, you could take your monthly payments and put them into a savings account. The monthly payment for $50,000 of unsecured debt is approximately $2,000 per month due to the high interest rates on credit cards. In two years of saving your credit card payments, you would have $50,000 in the bank instead of a credit card balance that still remains due to the high interest rates.

No one wants to file bankruptcy. However, one needs to make an informed financial decision when it comes to debt. If your unsecured debt is more than 1/3 of your gross annual income, then call me, Kevin Heupel, at Colorado Bankruptcy Help for more information. You can reach me at 303-381-4900 or submit one of the free-consultation forms without any obligation. I am here to help.