-Is bankruptcy the answer?-
Is bankruptcy the answer, when your back is against the door, the creditors
are calling, and there is no relief in sight?
I have some experience with this, because I went bankrupt over 10 years ago. My then husband and I declared bankruptcy. As I recall, we had about $5,000 worth of debts, but they might as well have been $50,000. We were called day and night by our creditors. When we woke up, when we went to bed. They threatened us, screamed at us, and at times, I genuinely felt suicidal from the pressure. I was working a part time job a University, and going to school with a fee waiver. My husband was doing work for a charitable organization, and we were provided our home, and were paid $125 a week. Our house was falling down around our heads. There were such huge holes in the roof that it literally snowed or rained inside, when it snowed or rained outside. One of the bathrooms had dry rot so bad that the fixtures had fallen out of the wall. We heated with wood in a small Franklin fireplace, that smoked, etc. Every paycheck I had went entirely to our creditors. My clothes were rags; we ate beans. Things were awful. So after going to Consumer Counseling, who wanted still more money from us. We decided to go bankrupt.
We couldn't afford a lawyer so we bought one of those do-it-yourself packets and did it ourselves. I remember going to court, and there being this long line of people sitting, and there were a couple of lawyers hanging out around the court. And when our case came up, a lawyer said he'd represent us for the duration of the case, pro bono, I guess his good deed for the week. At any rate, he just finessed things along somewhat. We had just planned on just answering whatever the judge asked us. Basically he asked if everything was true and correct, we said yes. And crack, crack, that was it.
We had furniture that we couldn't give away, a freezer, and four hungry dogs, but that was it.
I will tell you the relief was nearly instantaneous, we told our creditors when they called that we had filed bankruptcy, and they were included, and that was the end of the story.
For us, it had virtually no bad consequences at the time. Because within a month we were offered more credit cards, and off we went to the races again.
If I had it to do over again, I would not have declared bankruptcy. Yes I've had some difficulty buying cars, or renting apartments since then, but that isn't the reason. The reason I think it was a mistake, was that bankruptcy didn't solve the problem as to why we were in so much trouble. Additionally there were a lot of things we didn't know.
- Once the debts go to a collection agency, the law provides for the debtor to request that all communication be in writing. In other words, no more nasty phone calls. And even though they will threaten that they will go to court if you do this, they probably won't, that's just a script. They are required by law to notify you if they are going to court, so they can't go to court and you not know about it.
- You don't have to pay what they demand, but what you can afford each month, and most creditors will work with you on this. The difference is you aren't going through a debt collection agency, which gets paid by, either by how much they save you, or by a $5 per payment donation. It is possible to make your own deals with your creditors.
- Sometimes it is possible to take a moratorium completely for a few months, to get yourself caught up on other bills, like utilities, and get yourself straightened out so, that you have a realistic idea what you can afford.
- Chapter 7 isn't the only answer; there is Chapter 13, the court works out a repayment plan over a period of 3 to 5 years.
Bankruptcy might not wipe out all your debts; student loans and other indebtedness
can fall under a provision that exempts them from the bankruptcy process.
Even a chapter 13 in this case just puts off the inevitable.
So what would I do now if I had it to do over again? I would have found Debtors Anonymous that I didn't know existed, http://www.debtorsanonymous.org or http://www.solvency.org. It is a fellowship of 12 steppers for those who have problems with unsecured debt like my husband and I had. They could have put us back on our feet.
For example, they encourage tracking your expenses to find out what your needs are. They encourage paying for essentials first, such as food, clothing, shelter, utilities. In addition, they suggest you don't deprive yourself of money for entertainment, so that you can stick with the repayment plan and when you pay everything off, you won't feel like going on a spending spree. They encourage savings for car repair, retirement, and things that are really needed.
As I look back on that desperate time in my life, I know that bankruptcy was not the answer. Why? Well because I got back in debt again, all by myself the next time. Because we divorced anyway.
I wasn't prepared for car repair, medical expenses, and other things, and I stupidly got credit cards and used them to relieve the pressure on myself for clothing, or food, etc. I also took on student loans for going to school. I wouldn't even get the students loans today. I would follow DA's plan of working and saving, then going to school, so that when I finished my education, I would not owe for it.
Eventually, I followed that course after having gone to school twice, and having the schooling be of little or no use to me. The education that eventually moved me up in the world came from online courses, local community college courses, which I paid for at the time I took them.
But, thank God, after getting myself $45K in debt, I did find DA, and I did start taking the steps above, even though I really thought my check was going to be garnished and perhaps once again bankruptcy was the answer. But, some wonderful people showed me that that isn't the only way, and now my life is much different. I finally have broken out of the debt cycle for good.
So, is bankruptcy the answer? For me it wasn't, and for many of you desperately seeking answers, it isn't the answer because no matter how bad things seem, there is a way to recover.
I am not a lawyer, thus, if you have questions, about this please check with your attorney. Thanks.