Bankruptcy has often been associated with a negative image of a person who doesn’t want to pay his bills. While this may be true in a few and far between cases, the reality is that bankruptcy is often a choice of economic reality when bad things happen to good people. Clients feel ashamed or dumbfounded as to how they got to this place where they are now facing bankruptcy. To be sure, you are in good company. Many famous and successful people have filed for bankruptcy (to include Abraham Lincoln, Frances Ford Coppola and Walt Disney to name a few!). These decisions did not come lightly as you can imagine. Professional, personal and political reputations were at stake. The decision to file bankruptcy should not be taken lightly but it should be considered as a business decision, even if you do not operate your own business. It’s the business of getting your life and your family’s life back on track. Consider these questions below if you are on the fence about filing for bankruptcy:
1) Will I be better off financially in 5 years without filing bankruptcy? Will my debts be paid? Will I have savings for emergencies? Will I be able to cover my mortgage payment, my vehicle payments and my basic living expenses without undue hardship on my family? If the answer is no to all or most of these questions, bankruptcy may be the solution you are looking for.
2) Will my credit score improve over the next 5 years? If your debt to income ratio (the percentage of your monthly income going to pay off debt) is going to remain high, then that means that your credit score will not be getting any better any time soon. If you want a better credit score for future purchases such as a home with a mortgage and will not be able to pay down your debt significantly, then bankruptcy might be right for you. Eliminating your legal liability for debts eligible for discharge in bankruptcy will likely cause an improvement in your credit score over a period of 18-24 months after you file your case.
3) Can I live with the stress and uncertainty of doing nothing about my accumulating debt? The reality is that with today’s technology, creditors will find you. And they will hound you to no end. While many tactics are impermissible and even illegal, they are not likely to stop or get caught. Filing bankruptcy will stop all this. Creditor harassment affects your well being and your family’s well being in so many ways and will hinder your ability to focus getting back on the financial wellness track. Living with this constant harassment doesn’t have to be a way of life.
If embarrassment, guilt or the potential stigma of filing bankruptcy is the only thing keeping you from filing for bankruptcy, here’s my advice: Get over it! Those famous people who filed did and went on to do remarkable things. Imagine what it could do for you and yours in the next few years.