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Bankruptcy, snowball or avalanche: Which is right for you?

Taking a look at your finances can be a real wake-up call. Some people don't realize just how deep in debt they are until they gather all the bills into one place. When they compare the debt to their income and add in their normal bills, such as rent or mortgage payments, they realize that they can't possibly make everything work while making headway on the credit-based payments.

Filing for bankruptcy once you have this moment of realization, is one course of action. However, not everyone is comfortable with that. If you can't even make minimum payments on the bills, bankruptcy might be an option. If you are able to make the minimums and keep up with other expenses, you need to determine if you are going to have enough to live throughout the month. If you don't, filing bankruptcy could be an option.

Are there any other options?

If you have the money in the budget to cover the bills and still live, you can use the snowball or avalanche method to try to knock out your debt as much as possible. While these two methods are a bit different, they can both help you to pay off your creditors.

  • Snowball method: In the snowball method, you put as much money as possible toward your smallest debt while keeping up with other bills. Once that debt is fully paid, you move the money you spent on those payments to the next smallest debt on the list. This continues until everything is paid off. The theory is that seeing the steady decrease in the number of creditors you have will keep you motivated.
  • Avalanche method: You will pay off the debt with the highest balance or interest rate first by putting all extra money you have toward it. You then continue down the list based on balances or interest rates until you are out of debt. Some people prefer this method because they save money on interest and can see the huge balances going down.

How do you decide which option to pursue?

Because of varying circumstances, you must make a personal decision. It might help for you to grab the budget and determine what is realistic. If you see that bankruptcy is the choice for you, be sure that you have a complete understanding of the process and how it will impact you. Seeking guidance is a good idea since missteps in bankruptcy can lead to problems with the process.

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McBride Law Firm

McBride Law Firm
301 Jackson Street Suite 101
Alexandria, LA 71301

Phone: 318-625-0471
Phone: 318-625-0471
Fax: 318-445-8066
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