“How much will it cost to file bankruptcy?” is a common question for those struggling with debt. While it’s understandable to be concerned about the costs associated with filing bankruptcy, it’s important to also consider the potentially much larger costs of not filing. Delaying real solutions to your financial problems can lead to significant financial and personal repercussions.
Here’s what you need to know about the cost of not filing for bankruptcy in a timely manner. Contact The Law Offices of Paul Y. Lee at 951-755-1000 for a free legal consultation.
The Cost of Delaying Bankruptcy
Juggling Debt is Expensive
If you’re running behind on bills, you’ve probably noticed that every time you push back a payment, you incur late fees. These fees add up quickly and contribute to your growing debt.
- Late Fees: Every missed payment racks up a fee, increasing your overall debt.
- Increased Interest Rates: Late payments can lead to higher interest rates, meaning you pay more over time.
- Compounding Interest: Unpaid interest adds to your balance, leading to even more interest.
Debt Costs, Even When You’re Current
Even if you manage to stay current on your payments, the cost of debt can be substantial. Let’s break down a typical debt scenario:
- Credit Card 1: $5,000 balance at 18% interest
- Credit Card 2: $3,500 balance at 23% interest
- Car Loan: $18,000 balance at 6% interest over 48 months
Total outstanding debt: $26,500
Assuming you make all payments on time and don’t incur any additional charges:
- Car Loan: $20,291 total cost over four years, including $2,291 in interest.
- Credit Card 1: $11,923.09 total cost over 22 years, including $6,923.09 in interest.
- Credit Card 2: $9,554.12 total cost over 20 years, including $6,054.12 in interest.
If you continue making minimum payments, the total cost of your $26,500 debt will be $41,768.21, taking more than two decades to pay off, with over 30% of the total amount paid being interest.
Just How Much Does Struggling with Debt Cost?
When you start missing or making late payments, the cost of debt can escalate quickly.
- Late Fees: A $102.08 minimum payment on a credit card can drop to $5 applied to principal after a $30 late fee.
- Penalty Rates: Interest rates can jump dramatically, increasing your total interest paid.
Late Fees Can Drive Balances in the Wrong Direction
If you’re consistently late, your balance can increase even as you make payments, leading to a cycle of debt that’s hard to escape.
Penalty Rates Can Increase Costs
Some credit card agreements allow for steep penalty rates if you miss payments. These higher rates can significantly increase the cost of your debt.
Real Solutions for People in Debt
Delaying bankruptcy can lead to:
- Health Impact: Financial stress can negatively impact your health.
- Relationship Strain: Debt-related stress can strain personal relationships.
- Missed Opportunities: Money spent on interest and fees could be better invested elsewhere.
When to Consider Bankruptcy
If you’ve been struggling with debt for months or years without improvement, it’s time to consider your options, including bankruptcy.
- Chapter 7 Bankruptcy: This can wipe out credit card debt, potentially saving you thousands of dollars in interest and fees.
Contact The Law Offices of Paul Y. Lee for a Free Debt Evaluation
If you’ve been struggling with debt and your situation is not improving, you owe it to yourself to explore all your options. The Law Offices of Paul Y. Lee has helped many people in Southern California get out of debt and build a stronger financial future.
Take the First Step Today
Contact The Law Offices of Paul Y. Lee at 951-755-1000 to schedule a free consultation and learn more about how we can help you. Don’t wait until it’s too late – take control of your financial future now.
