Don’t send good money after bad. Have you heard the phrase? It means spending even more money on an investment with the hope of recouping your original investment.
Most of our clients feel their credit card purchases to be investments. From clothing and food and appliances to rental cars and educational expenses, most people use plastic to purchase with the intent of repayment.
Overextension of credit is where most people run into trouble. At that point you may want to talk to a bankruptcy attorney. Lee Legal serves D.C., Maryland, and Northern Virginia.
Breaking the debt cycle
Once you realize that you cannot reasonably ever repay all of your creditors, consider bankruptcy. If you have assets or income to protect, Chapter 13 requires creditors to conform to a plan proposed by you. If you have few valuable assets or income insufficient to meet your obligations, Chapter 7 can wipe the slate clean and let you start over.
Before you send away good money after bad, talk to a bankruptcy lawyer. We help our clients break the cycle of debt.
Stop paying the credit cards
Once you know you qualify for a Chapter 7 bankruptcy, then you can stop paying credit card bills. You can’t rack up charges or use them other than necessities before filing. But you won’t need to send most creditors another penny.
If you qualify for a Chapter 13 bankruptcy, stop paying the monthly amounts and start your bankruptcy. If you know you have to file, don’t procrastinate.
This applies to many other types of debts, too. You can stop paying old utility and medical bills, lines of credit, and personal loans. All of these debts will be discharged in your bankruptcy.
Don’t send good money after bad
Another way to explain it is by the so-called “sunk cost fallacy.” A sunk cost is money already invested. The more you invest, the more difficult those sunk costs are to abandon. Yet rational decisions should be made on future value. Knowing when you’re sending good money after bad isn’t really so easy. We often have emotional attachments to our investments.
Miscalculation is often difficult to admit. Once you realize you’re overextended financially, the sooner you correct course, the better.