Does bankruptcy Make Sense Economically?
In evaluating whether or not bankruptcy makes economic sense, answer these questions:
- Will bankruptcy discharge enough of your debts to make it worth your while?
- Will you have to give up property you desperately want to keep?”
- Is the cause of debt problem temporary or long lasting? Permanent disability and job loss are both devastating. But one will end and the other will not.
- Creditors are human beings. They are also business people. They do not want to see bankruptcy for you. They know customer relations are their lifeline and bankruptcy is profit out of their pocket. Therefore, can they work with you to lower payments, skip a payment, change billing dates, anything?
- Is it possible to get assistance from a legitimate debt counselor?
- Instead of thinking of all the debt you have or the high interest or high balance debt, think of the debt that can be paid off fastest. Is there any way to pay one debt off quickly by selling something and then use that added income to apply towards the next fastest payoff. In other words, do not try to chop down the whole rose bush. Work with cleaning off one or two unsightly limbs first and see where you are. It is far to easy to get tangled up in the thorns and not be able to envision a clean emotional environment.
Special Note: You should be aware that any cosigner automatically becomes liable for the full amount of a co-signed debt. If this is not what you intend, you should not file or you should make arrangements with the court for repayment. But even debts you do not want included (such as a loan from a friend) must be included since the court does not accept any partiality. Even if a divorce settlement divides the payment of a joint account, the second party on the account will be held liable for the debt in the case of bankruptcy.
Bankruptcy Should Be a Last Alternative
Bankruptcy should be viewed as a last alternative to managing an overburdened debt load, although for some it is the only logical alternative. Bankruptcy reduces or eliminates debt under the supervision and protection of the court.
Pre-bankruptcy credit counseling and post-filing debt education is required by law from a government-approved counseling agency. Counseling is available by phone, Internet or person and often available in multiple languages. But be sure it is approved by the Department of Justice, regardless. Approved agencies are on the list at the above referenced site.
Each state has established exemptions from bankruptcy court as well as state medium income to determine eligibility of bankruptcy. Though not mandatory, a bankruptcy attorney is recommended. If nothing else, a bankruptcy attorney should be sought for an initial consultation which quite often is free of charge.
A person or couple can declare a chapter 7 (straight litigation) which often wipes the slate clean with select exceptions. A Chapter 7 remains on a credit report for 10 years. A Chapter 13, known as wage earners plan, debts are restructured to be repaid within 3-5 years with 10-99% of the debts being repaid. The filer gets to keep their home. A Chapter 13 remains on a credit report for 7 years.
Keep Your Head Up!
There is one final point which should be made clear. If bankruptcy is inevitable, keep your head held high. It is not the end of the world… it just feels like it. Even bankruptcy does pass and you should never lower your head because circumstances overwhelmed you. Just learn from your experience and pass it on to others. That’s all.
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The truth is the average consumer can eliminate all debt including their mortgage with the money they currently earn in an average 7.5 years. I have been teaching people how to do this for years and you can see how it is done yourself by receiving the free Debt Freedom Mini-Course via email.
You might also want to know that that eliminating all debt is like getting a 40% Tax-free Salary Increase. If you don’t believe me, read the blog about it.
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