- Bankruptcy should be considered as a last resort, not as a first
- If you do decide to file make it a sound decision instead of an emotional one
- The ramifications of filing bankruptcy are more than just getting your debt cleared
- What bankruptcy won’t do for your finances
- What happens when you write a bad check to the Girl Scouts
Talking about bankruptcy is not something I enjoy doing. It is also something I hope you are not going through. However I field calls and emails all the time from people who feel like they are stuck and their only way out is to file. To me bankruptcy is like divorce; there are good people who go through divorce but is isn’t something I suggest people go through.
But with that being said, I’m not angry or disappointed if you do end up filing for bankruptcy protection. However I recommend filing only as a last resort, after you have tried everything else first. On today’s lesson we cover three things to do before filing for bankruptcy.
- Assess your finances-When you are getting hounded by creditors and you don’t know how you are going to come up with this month’s rent payment, it can be hard to sit down and spend some time with your finances. You might feel like, “what’s the point?” and the stress will want to make you not check your mailbox for fear of getting more bills. It is an emotional situation and you can feel like you just want to give up. But put the emotional energy into knowing your financial situation better. It will help determine if you are truly bankrupt. I have found a lot of times that bad financial situations are a result of just being disorganized. Finding out what your income and expenses are each month might allow you to see that there are other alternatives to bankruptcy.
- Don’t pay your creditors-Hear me out on this one. I’m not saying stiff your creditors when you have the money to pay them. What I am saying is to sit down and make sure that you take care of your four walls. After that, if you have money left over, you can then pay your other bills. But if you don’t have anymore left over then you can’t and won’t pay anyone else. If you have a difficult time not paying your bills on purpose, what do you think will happen when you file bankruptcy? But by focusing on your needs first, you gain back some control of your financial life. Once you regain control then you can go back and save some money and settle later with your creditors. That way you can hold your head high that you tried your best, your creditors got some money, and you are able to have your life back.
- Ponder the ramifications of filing-Filing for bankruptcy might seem like the easy thing to do in the short term but there are long term financial consequences to declaring bankruptcy. Other things you need to think about include what will I do for a car if I am giving up the car in bankruptcy? What happens to my house? What assets will they seize? If you can’t pay your bills due to no income, bankruptcy does not create an income. How are you going to pay for your basic necessities? Also student loans, which are a major cause of financial strain, are not allowed to be bankrupt. How will you pay them? Don’t file for bankruptcy out of emotion. Consider all your options and be at peace with your decision.
In addition to today’s lesson I’ve done other shows on bankruptcy including:
Finally we also discuss what happens when you bounce a check with the Girl Scouts. Bad things happen. Seriously though, a man paid for his Girl Scout cookies via a check last year and after his check bounced, they sent it to collections. How much did they sue him for? $740! How does $42 go to $740 in one year? It’s called debt collector math and it stinks. I explain why I feel the lawsuit will ultimately get dropped.
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