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Too much debt may point to bankruptcy instead of payment plan

When the debt load of an individual or family residing in Arkansas or elsewhere reaches a certain point, it may be that no comprehensive payment plan with creditors can possibly succeed. The consumer's limited ability to repay in affordable monthly installments, based on available income and necessary living expenses, may doom the plan at the outset. If such a repayment plan were attempted, it would take decades to pay off the debt, and, in some cases, the amount owed may go up rather than down. That scenario is generally one that cries out for bankruptcy relief.

As explained by a successful 34-year-old author and owner of a personal finance consulting firm, her debt load was once so high that it would have taken forever to pay it down. She states that she and her husband absolutely had to file bankruptcy, and that wiping out their debt allowed them to reset their finances. Although she states that the filing in 2011 wrecked their credit, she now boasts a credit score of 740.

She explains that they at first set up payment plans and that she even got a hospital to forgive $250,000 of the $400,000 bill she owed for an extended hospitalization. After two years of scraping and pinching pennies, however, they realized that they could not even put a slight dent in their $2 million debt load incurred from a business loss during the recession. That insight led to a bankruptcy filing and eliminating the huge unsecured debt that plagued them. The cutoff point for many, however, may be far less than $2 million.

For an Arkansas family earning fixed incomes, a total debt load of $25,000, give or take, could be impossible to pay down. Each case depends on its own particular budgetary factors. The best way to get an informed answer is to consult with a consumer bankruptcy attorney. The attorney will explain whether the consumer qualifies for bankruptcy relief and whether the debt load can be handled in some other non-bankruptcy manner. A review of the budgetary constraints will provide a comparative analysis of the debt relief options.

Source: New York Post, "I was $2 million in debt now I'm wildly successful", Haley Goldberg View, Jan. 1, 2016

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