Daily Archives: October 18, 2011

Are You Teetering On The Edge Of Bankruptcy?

teeter totter balance

Although bankruptcy filings are down, unemployment remains high and fewer people are going to credit counselors.

Credit card debt went up again.

Some people may just be giving up.  No job, no income, no assets, means nothing for creditors to get; no reason to file bankruptcy.

But, what happens when you get that new job?  Will you be greeted with wage garnishments from judgements entered when you were broke?

One of my clients told me a couple of weeks ago that she read most people do  not actually file for bankruptcy until they have been bankrupt for a couple of years.

Seems right to me.  It is a tough decision to make emotionally.  Feels like failure.  All my clients want to pay their creditors, they go to extremes, even taking out retirement funds that creditors cannot get.

We humans do not do things until we are ready.  We avoid pain and seek pleasure.  Nothing wrong with that.

So, when the pain of making the decision to seek protection and relief by filing bankruptcy is exceeded by the pain of putting up with the harassment, and the chronic shortage of money, the inability to get new clothes or do anything fun, accepting the reality that there is not enough money coming in to pay everything going out, that is when people actually file bankruptcy.

I do not push people into bankruptcy.  I view my role as, explaining the options.  If you go left, this can happen, if you go right, these things can happen, if you stay where you are, these are the possibilities.  Which is the “best” way is always subjective.  I explain the upside and downside of each option.

The thing to remember about filing when you are broke:  that is the best time.  Creditors will not be able to argue that you can afford to pay something, and should be in Chapter 13 instead of Chapter 7.  This can be a problem when you get back to work, as, all of a sudden,  you will have some money left at the end of the month after paying your living expenses.

If you have any questions, ask away!


photo credit:  random places