Locked up in debt?
What are your choices?
Is it better to live with your debt and keep making minimum payments?
Or, is life worse if you file bankruptcy?
That question sums up most people’s fears about shedding their debt through bankruptcy.
What will life be like, after bankruptcy?
Good questions. And I applaud people who realize that debt and debt relief each have future consequences. I’ve talked about it before.
Clients fear the “bankruptcy unknown”, closing their eyes to the precariousness of their current situation as though doing nothing is a worthy choice.
But let’s turn the question around: what will life be like if you continue on as you’re doing now?
Life in debt
Servicing debt from the past cuts down your future options. Your paycheck is already committed before it hits the bank.
Whether it’s payday loans or credit cards for this month’s necessities, you’re locked in.
A slight bump in the road, and you’re really in the soup. Most Americans say they couldn’t handle a $500 emergency without borrowing.
But absolutely most compelling for me, you’re probably making no provisions for your old age.
Lots of folk tell me they don’t think they’ll ever retire. Some say it because they enjoy work; most say it because they can’t make ends meet without a job.
But they will get old, working or not. The job choices will contract, and their ability to be productive will diminish. I see it personally with the elders I’m caring for now; they can’t handle the mental or the physical sides of a job.
Of course, the stress of being in debt may shorten your life. Stress impairs your decision making. That’s a terrible way to meet the challenges of funding your old age.
After bankruptcy
So, what if you broke out of debt by filing bankruptcy. What happens in the real world?
Let’s list the negatives of filing for bankruptcy.
- Credit in the immediate future is more expensive
- Bankruptcy shows up on your credit report
- If you are a renter, some landlords are uncomfortable
- Some new employers are put off
These negatives fade in importance over time.
They need to be weighed against the equally real consequences of not solving a debt problem.
For most considering bankruptcy, their credit record is already blotched; a bankruptcy filing is not going to be the first adverse entry on their credit report.
But credit scores, the predictive formula, rather than the history that’s a credit report, may improve instantly: your debt to income ratio gets better.
Bankruptcy might be the first step to improved financial health.
Bankruptcy may even be a step in better physical health. Stress is a killer.
Bankruptcy enables saving. You’ve proved you can live on what’s left after minimum payments.
Use that same discipline to set money aside for the unexpected, and for the inevitable old age.
Live long and prosper.
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