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Bankruptcy - A word that strikes shame, fear and disgust into many.

So I’m this debt expert guy that helps people find solutions to difficult financial problems and you’d probably never expect me to say this but, not enough people go bankrupt.

Maybe it is just that segment of the population that I deal with in the U.S. and U.K. on a daily basis but day after day I deal with people that for a number of reasons refuse to consider bankruptcy as an option in their debt troubles. Now I’m not suggesting that you just go out and walk away from your debts but there is a time and place for every solution, every season.

It seems like such a shame is to watch couples, individuals and families continue to struggle month after month in impossible situations, trying to repay their creditors but leaving themselves in a very dangerous place for their safety, their mental health and their own financial prudence.

By trying to repair past misfortunes and financial sins with future labor they are in fact doing not much more to pulling their past mistakes into their future, rather than resolving them.

Let me ask you, when facing a difficult credit crunch do you have a greater duty to repair the past or repair the future? Should you sacrifice reasonable care for you and your family today and tomorrow to make up for yesterday?

I don’t suggest bankruptcy lightly having gone bankrupt myself in 1990. It was a painful experience. Watch my bankruptcy video.

So There Was This Guy Yesterday

Yesterday I was talking with a businessman that had been a fairly high income earner and then beyond his control his supplier went out of business and that just started a chain of events in conjunction with a slowing economy that left him in a downward spiral. No matter how much he tried to recover, he just could not.

His situation had passed through the denial stage and he was in a full blown panic. His mental state was that he should liquidate, at great penalty, his retirement account to make it a few more months. But it was clear that there was no expectation that anything was going to change in the meantime to improve the forecast.

All that would happen at that point would be that he would be in the same situation, without any funds in his retirement plan, and still against the wall, but now, just in warmer weather since it would be summer then.

He admitted that he was feeling overwhelmed and that for the past few months he had not been opening all his mail. A normal reaction for many. Yesterday he sat down and opened it and came to terms with how much he owed. Including a big tax bill. It frightened him.

Now in a perfect world there would be a button to push to make the guy switch off his emotional brain, robot up to sell again, make his supplier healthy again and improve the economy so customers were once again lining up at the door.

But we don’t live in a perfect world, do we?

The reality was that with his current mental state of feeling like a loser and failure, the supplier and economy situation, he was in a pretty deep, dark and cold hole.

While his creditors were screaming for money, none really offered any solutions that helped his overall situation. And the emotional fear and panic of his situation had led him to start to use his credit cards to pay to put food on the table to feed his family. He didn’t know what to do.

The Worst Time to Recover From Debt

When faced with having to sell yourself for a new job, a new customer or to land a new contract, it is much easier to do that in inspiration rather than desperation.

When you are desperate for the sale or job it is just that much harder to land it. People smell your desperation and its not a beneficial quality in difficult times. For whatever reason, it’s a turn off that leads to a self-fulfilling prophecy that leads to a continued downward spiral that leads to continued debt and depression and no recovery.

Being in debt and dealing with trying to get out of debt is not just about the numbers. It’s also about looking at the person as a whole, their emotional state, their feelings of failure, their opportunities for recovery and giving them a path to follow that will lead to a real and positive change.

Impossible situations and impossible debt without a solution can create or intensify depression and hopelessness. This pit of despair can leave you wandering in the dark from day to day or thrashing about frantic looking for any miracle solution, but never moving forward.

Instead of tomorrow being an improvement on today, it is just more misfortune and punishment.

It’s Not You, It’s Just Your Life on Dominos

No matter how much anyone wants to be angry and disgusted with people who can’t meet their obligations or financial promises, it’s not going to change the situation.

It’s not going to undo that traffic accident that left you injured, put your supplier back in business, return your former employer to good standing, cure your child of leukemia, make the rain come, stop your partner from embezzling, stop your nephew from committing credit fraud in your name, and on and on.

People should take responsibility for as much as they can but at some point it becomes impossible and unreasonable.

Take for example the real family that had fallen on hard times and was trying to pay their creditors but was unable to afford proper food, fuel for the home and car, and any activities for their kids.

Mom told me how she didn’t let her kids go to any parties of their friends from school because they could not afford to buy a gift. The children had not been to a movie or on a family outing to a fast food place in many months. Dad was hunkered down trying to make things better at work. He was a V.P. at his company but wages got cut during these trying economic times and he was looking for a better job, but no luck yet.

Mom was working part time when the kids were in school at a local retail store but trying to find hours that worked around the school schedule was tough and there was no way she could afford after-school care or a sitter.

Their debt consisted of a car payment, mortgage on a house bought in better times that was now worth less, and some credit cards with balances that had grown, not from fun but desperation. They now owed a little over $62,000 on 9 credit cards but hadn’t realized it till they added it up. Spreading the debt out over multiple cards made it mentally easier on them.

There was no money in savings, no dental care for the kids, no vacation planned, and no hope for the future. The 401(k) had been cashed out but that was gone now also.

Mom and Dad had the belief that most do, that they had a moral responsibility to honor their promises and debts. They constantly made promises to the debt collectors that called on a regular basis, often as many as 12 calls a night. No matter how much they asked for understanding, to the debt collectors they were simply only as good as their last payment.

Last month some payments got reduced or missed and that started a barrage of autodialed collection calls. Last month their dog was hit by a car and they took her to the vet but couldn’t afford the surgery so they had her put down, it was cheaper. The kids were devastated but so were mom and dad that had to deal with it.

So How Long is Reasonable?

I hate to see a family like this leave themselves in a financially disadvantaged place, with no expectation that things are going to get better, and discount going bankrupt for fear of how they might feel and what people might thing about them.

In situations like this it is almost less responsible to not go bankrupt. To leave yourself and your family unable to prepare for tomorrow, to get proper medical care, to have an emotionally stable home or even to have some basic hope for tomorrow.

This family can struggle like this for years but until that moment comes when they can make their last payment all it will take is an unexpected event and all their years of struggle will be for naught, the collection demands and notices will continue for seemingly ever.

So how long should people struggle and try before considering bankruptcy? I guess it’s like that British question, “How long is a piece of string?” Just a question without a good answer.

In the case of our family here there is no reason in the world why they can’t go bankrupt, close the door on their debt, get a fresh start and then repay their creditors, if they want to, what they can afford for moral reasons. That’s what I did finally. What happened surprised me, keep reading.

What makes their current situation unbearable is that their lives have taken a back seat to the individual creditor demands. Creditors don’t care how their demands for payment leave you at the end of the month. They just make the demands the computer tells them to make.

Your debt is only personal for you. For the rest of the world it is just business and demands, reasonable or not.

My Creditors Didn’t Want Me to Pay Them Back

So after my bankruptcy and once I started rebuilding myself I started to repay my creditors and the response was surprising.

• First off, nobody said thank you, not that I was expecting it but some acknowledgement would have been at least courteous.
• About a third of my creditors were annoyed and asked me to stop sending payments because they did not know how or where to apply the payment.
• Another third of creditors no longer owned the account and did not know where it was now.
• The last bit said nothing, did nothing and could not provide me with any sort of accounting for the payments I did make. The payments were cashed and just went into a black hole.

So I couldn’t repay those that asked me not to, couldn’t repay those that did not know where the debt was and once I stopped making payments to the rest, when I thought I was done, they never said a word. A very surreal experience.

So Is Bankruptcy For You?

The only way to know if bankruptcy is right for you is to talk to either a bankruptcy lawyer or bankruptcy expert in your country. Talking to a bankruptcy lawyer to find out more about the process does not make you bankrupt, just more informed.

It is easy to find a local bankruptcy lawyer.

What I hate to see is people avoiding bankruptcy for fear of how they think might others might think of them or how they will feel. Who cares, the kids need braces.

No matter how much the farmer in a drought wants it to rain, he can’t will or wish it to happen. And the same is true for you. No matter how much you want or will your financial situation to change, it might not until you take some decisive action to change it.

Don’t discount going bankrupt out of hand, at least consider it as a legal and viable option when appropriate, please.

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Steve

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