Friday, January 14, 2011

Why File Bankruptcy?

Why should I file a bankruptcy?  For some, the question might elicit a "duh . ." response. As in, "Why should I file a bankruptcy?."  "Duh . . .to get rid of your debt."  (Shrugging, head-shaking and eye-rolling are optional).

But seriously . . . a lot of my clients ask me this. It usually stems from a sense of wanting to do the right thing, which usually includes paying your creditors. And while that is a good and moral and appropriate goal, for many people it just is not a feasible goal. Even making your best effort and paying the minimum payments each month, even one credit card with a $6,000.00 balance can take years . . .YEARS . . .to pay in full. Multiply that by three or four or even eight and, unless you are still not old enough to drink, your grandchildren might be paying that off some day. Okay, I exaggerate. A bit. The point is, if you have so much debt that, realistically, you will be paying and paying and paying and never hopping off that treadmill for the forseeable future, bankruptcy should be something you are considering.

Ask yourself questions like these:  is it possible to completely pay off all my debt over the next five years just paying the minimum? Is it possible to pay it all off in about five years if I doubled the minimum payments? Can I afford  to consistently pay out $                  regularly while covering all ordinary and necessary expenses? If you can reasonably see this happening; if you can see fitting regularly monthly payments into your budget over the next five years; then you may be able to avoid bankruptcy.  If, however, you cannot see yourself being able to do that, it is probably time to consider filing bankruptcy.

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