I recently met with a couple who came in because they were finding it harder and harder to make ends meet, even though, together, they make almost $100,000 a year. They have three children. They began their story by explaining that a recent hail storm had caused them to rack up a significant amount of credit card debt to make repairs. Their high insurance deductible meant that they would have to pay for a large portion of a replacement roof and windows out of pocket, and they didn’t have any savings to pay for the repairs.
As our consultation progressed, I asked them about their vehicles. Both of them were driving relatively new vehicles, but they had had to roll a previous loan into one of the car loans, which meant they were paying significantly more on a vehicle than what it was worth. Their monthly car payments were already a stretch for their budget.
I asked if there were any more vehicles. There were. They also had a boat and a motorcycle, both of which had loans on them and, again, were straining their budget. Although they were prepared to surrender the boat, the motorcycle was almost paid off, and they were hoping to keep it.
This couple had pushed their household to the limit with these luxury purchases, and when the hail storm hit, they found themselves overextended. Unfortunately, at this point, they may have no other option than to file bankruptcy to handle their debt. Even if they surrender the boat, the lender will likely want them to pay any deficiency left on the loan after it auctions the boat for sale. And, of course, the credit cards have already been maxed out.
Sometimes I wish I would have been able to meet with my clients a year or two before they actually come into my office. You’d be surprised by how much can change in that short of time. Had this couple come into my office a year earlier, we could have talked about other solutions besides bankruptcy. I would have told them to get rid of their toys. After all, that’s what the boat and the motorcycle are. They aren’t necessities and the debt was stretching their household budget thin, leaving no room for unforeseen events, like a hail storm.
Before you decide to make a purchase like a boat, motorcycle, timeshare or other luxury item, take into consideration whether or not you can manage that debt and an unexpected major expense, whether it’s a home repair or medical emergency. Taking that time may help you avoid bankruptcy.
If you have questions about whether bankruptcy is the right option for you, we hope you’ll come in for a free consultation with an experienced Colorado bankruptcy attorney. You can schedule an appointment by calling 303.331.3403 or by using our online scheduling system.