But I want to pay my creditors …

One of the cornerstones of American consumer finance — mortgage, auto loan, and credit card lending — is the idea that the vast majority of Americans want to pay their debts. Whether due to our culture, upbringing, or pride, we as a society value people who pay their debts and live up to their promises and obligations. Without this shared belief and sense of duty, we would not have the credit and financial systems we have today — nor would we have among the lowest interest rates in the world.

While creditors certainly have many other means to get their debts collected, borrowers’ sense of duty to pay is one of the main reasons people struggle for years to pay their bills — even though they could file a bankruptcy case and resolve their debts permanently.

But let’s get something straight — you can pay your creditors in bankruptcy.

If you have the ability to make a meaningful payment to your creditors ($150 per month or more), federal bankruptcy law requires you to do so. But that’s not all that happens in a Chapter 13 bankruptcy case:

  • Creditors all participate in the payments equally, on a pro rata basis. In bankruptcy, creditors are not rewarded for being obnoxious or overly aggressive.
  • There is a fixed ending to the payments — a discharge of debts at the end of the case — so that you know when you have completed the payment plan, the debts are resolved.
  • Unreasonable interest rates, late fees, overlimit fees, and other charges that accrue after the bankruptcy is filed are discharged forever in most cases.

And most important, the payment is based on what you can afford, not what the creditor wants.

Don’t let your pride keep you from resolving your debts in a fair, structured, and affordable way.