Is there an alternative to bankruptcy, my clients often ask. Can I realistically avoid filing bankruptcy?
A fellow bankruptcy lawyer outlined what it takes to get out of debt without bankruptcy.
- make more money;
- spend less on today’s expenses; and
- use all your savings to pay off debt.
If you could do all three, for long enough, and, your debt isn’t too large, it probably works.
I want to pose the question: even if that’s possible, is it smart?
Cost of bankruptcy alternatives
So, you want to pay off your debt without help from the legal system.
What do you forgo in that scenario?
If it’s travel; lattes; and premium cable that go, I’m OK with that.
But, what if the things you do without are emergency reserves; health insurance; and retirement savings? I think that continuing to live on the financial edge is a poor choice.
One small glitch, car trouble, ill health, or fewer hours at work, and your fine and honorable plan to pay your creditors comes unraveled.
Make good decisions about your future
Whether your financial difficulty was caused by bad luck or bad choices, don’t make a bad decision, driven by pride, to compound the trouble by living without a safety net.
Too many of my clients arrive in my office with the conviction that they incurred this debt and, by damn, they want to repay it.
At some level, I applaud that desire. But what are the likely consequences of repaying that debt if it means making no provision for financial stability now and in the future?
Have you just traded one sort of bad situation for another?
Part of reforming your financial situation involves looking beyond this month’s bills to the needs of the next decade and beyond.
Lots of folks got into credit card debt focusing on their ability to make the monthly minimums, rather than on their ultimate ability to pay the debt off. They forget that minimum payments on most credit cards are set to keep you in debt for several decades.
Particularly in times of profound economic uncertainty, consider the merits of a fresh start and a make a plan for financial self sufficiency.