Many people use their tax refund money to pay what they can on certain bills. The “pay what you can” option for handling a debt problem only works for the debts that you are paying.

My view on this option, and all others, is this: If you can’t see yourself going all the way down a certain road, then why take even one step in that direction?

Sure, using tax refund money to pay what you can on some of your bills can help for that month, but will you have enough income to make the payment next month?

Here’s my concern with the creditors that you are not able to pay with your tax refund money: I have people coming into my office each week with paperwork showing that they were just served with a lawsuit on an old credit card debt.

Case Study: An elderly lady came in for a consultation, and she said that payments on her 4 credit cards totaled $750/month. After she suffered a cut in hours at her job, she was only able to pay 2 credit cards a total of $300/month. Here reasoning was this: “Hey, I’m paying all that I can afford to pay.”

Although paying what she could afford was a valiant effort, she came into my office with a lawsuit from each of the 2 credit card companies that she was not able to pay. She had no cash savings and she was living paycheck-to-paycheck.

When you get to the point that you cannot pay all of your credit cards, you may want to stop paying any credit card. My thought is this: If you can’t pay them all, then why pay at all? You may need to save that money so that you can get rid of the debt using debt settlement, credit card lawsuit defense, or bankruptcy.

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