I have never met someone overjoyed at the prospect at filing bankruptcy. It’s an avenue contrary to most people’s upbringing and sense of self and in almost every case is reflexively avoided. To most people, it feels like a personal failure or a personal reflection. This is not true and is dangerous thinking that can delay dealing with the issue.
While I understand that mindset, my first goal in every consultation is to unwind that thinking. Bankruptcy is NOT a personal reflection…. you were not a bad person before you got into debt and whatever caused your troubles, in most cases, were not your fault or caused by bad intentions. The simple truth is bad things happen to good people. Especially in this economy. Many of us are collateral damage of this great recession, the causes of which are many and can be debated. But one thing is beyond debate: You did not create this mess.
While I cannot undo the past, I can prepare you for a future and a fresh start. As my old football coach used to say, only worry about those things you can control. The past is done but the future can be shaped by your decisions…it is something you can control. And the simple fact of the matter is that bankruptcy can be a smart decision. Rather than think of it personal terms, think of yourself as a company…say John Doe, Inc. Look at your income statement and balance sheet and if you have more debt than your income can comfortably service, bankruptcy begins to reveal itself as the smart business decision, not an act of personal desperation. What would General Motors do with the same income statement and balance sheet? This often become even more self-evident when many of the following factors are considered.
Your credit is already severely damaged.
- Think of your credit as patient in the hospital. Often times, by the time you are reading this, your patient is on life support. Bankruptcy is merely pulling the plug on a brain dead patient…except in the case of credit you can be resurrected.
- You can rehabilitate your credit to the 700s in about 24 months after a bankruptcy
- You already own a home
- If you want to keep it, you usually can and now you have the very thing good credit is designed to help you obtain—a house.
- You are approaching retirement years or have not saved enough for retirement due to debt obligations
- As we get older, we all begin to think of whether we are saving enough for retirement….getting rid of onerous debts helps you save for this and this is especially true if your credit is already damaged.
- You are severely upside down on your house
- You are about to have children or your ability to raise your children as you wish is severely hampered by your debt level.
- Bankruptcy can be a gift to your children…. By eliminating the debt, now you can save for college, have a more enjoyable Christmas and give them greater life experiences.
While I would never make light of a decision as serious as bankruptcy, the fact is that once the emotional stigma is stripped by raw facts it is not a desperate thing to do but a smart thing to do.