Daily Archives: January 16, 2014

Why Should You File Bankruptcy?

Bankruptcy should be a last resort; when there is no other waypumpkinPUKE

out of your debt problems.  Well, you cannot borrow your

way out of debt, so I do not count getting money from friends or

relatives to pay bills as a viable bankruptcy alternative.

You feel like the pumpkin in the picture when you decide to file

bankruptcy, but it is the solution, you are already in the debt problem before you ever call a bankruptcy lawyer.


Yahoo Finance, among numerous others, writes about why people do file.

Their top five reasons to file bankruptcy:

1.  Medical expenses

Well, yes, inability to pay same is a big reason for filing a bankruptcy case.  Most medical expenses happened to us, we did not seek them out.  No way to avoid them.

2.  Job loss

Same here.  We usually do NOT know we are going to lose our job, or even have hours or pay scaled way back, when we are borrowing money.  No way to avoid this one either.

3.  Poor/excess use of credit.

Not sure what this means.  It does not really answer the question.

As human beings, we seek pleasure, and avoid pain.

So, anyone who files bankruptcy is seeking to avoid the pain of debt collectors, whether manifesting as foreclosure, repossession, garnishment, phone calls, whatever.   People file when the pain of creditor harassment and worry is greater than the psychic pain of filing bankruptcy.

Virtually all of my clients are reluctant to file.  They feel like failures.  They want to pay their debts, not to file bankruptcy.

“Poor/excess use of credit” sounds like hindsight.  Sure, if you see now that you cannot pay it,  it looks like you should not have borrowed the money.

4.  Divorce/Separation

Yup.  See this one all the time.  When one moves and the other stays, the living expenses for both go up.  Again, most of us do NOT borrow more money when we see this event coming.

5.  Unexpected Expenses

Loss of property due to theft or casualty, such as earthquakes, floods or tornadoes for which the owner is not insured can force some into bankruptcy.  (from the Yahoo Finance article)

Uh, have not seen this one.  Really.  Other than a business, when the bad guy partner or employee makes off with the proceeds or is discovered to have had a hand in the till for awhile.

Regardless of the event, it is not a case of earthquake-medical bill-job loss-divorce, now I traipse on down to the bankruptcy lawyer’s office.


Sit down and figure out your income and living expenses.  See what you have to work with.

Then, talk to your creditors.  Well, I always recommend writing, so you can keep copies and have a record.

There is nothing magical about having a lawyer do this for you.  Find out if they will take a deal that you CAN REALLY live with.

If not, then contact a bankruptcy expert to explore your other options.