When residents of Wisconsin are faced with large amounts of debt, one of the things they may do is speak with a credit counseling agency to see what can be done to pay off what they owe. However, while taking advantage of debt relief options and paying off creditors is admirable, it may end up harming someone in the long run. This may seem obvious, but when people eliminate their debt instead of filing for personal bankruptcy, the money they are spending to get out of debt is not available to be saved or put towards a retirement fund.
When individuals are not setting aside money for emergencies and retirement, they may end up putting themselves in a worse financial situation. If someone is sending most of his or her money to a creditor, when he or she needs a car repaired or to pay for a large medical bill, the money is not on hand, meaning he or she may have to borrow more. Additionally, money that is put into a retirement fund grows based on investments and interest, so people are actually losing even more money.
For example, if a couple agrees to pay $650 a month to pay off $30,000 over five years, they may agree to it because it seems like it will get them out of debt in a reasonable time frame. However, the same couple could have added over a million dollars to their retirement fund with the same money.
Someone having trouble making ends meet and coping with enormous amounts of debt may want to speak with an attorney. A bankruptcy attorney could provide information regarding Chapter 7 and Chapter 13 filings and help him or her evaluate which type may work best for his or her financial situation.
Source: Huffington Post, “Why Getting Out of Debt Can Cost You Your Future,” Steve Rhode, April 2, 2013