Is Bankruptcy The Answer?
I was on the Financial Peace University Forums today and happened to notice the word bankruptcy being thrown around as an option. This isn’t a rant as much as it is an argument as to why you should avoid bankruptcy completely.
I realize that this is a very touchy subject for people so my intention is not to make a judgment, but instead to express an alternate view. I would like to remind everyone that I was very close to filing bankruptcy myself at one or more times in my life and am very glad that I didn’t. I assure you it wasn’t because I struck it rich.
The truth is that after listening to Dave Ramsey talk about bankruptcy,as well as every other person that calls his show, I have come to the conclusion that bankruptcy is no fun!! It seems to be a very, very painful process that can cause an emotional breakdown. Declaring that you have no money is a tough pill to swallow to say the least! Still, people file bankruptcy in record numbers. Some argue that filing bankruptcy is a service that keeps families from becoming homeless, and some say that it is a way for people to avoid the repercussions of irresponsible spending and poor money management to give them a fresh start. We will talk about them both.
Bankruptcy Keeps People From Becoming Homeless?
Really? I am so surprised every time I hear this argument, because the first thing I want to ask is, “Did that person decide to file bankruptcy AND quit their job?” In my mind this argument is bogus!! Getting foreclosed on is not easy, and having your car repossessed is no picnic either if that is the only car you have but to say that one couldn’t go find a cheap apartment, buy a beater and reorganize their financial life in a way that would enable them to gain control is senseless.
Irresponsible Spending and Poor Money Management?
You betcha!! This is the reason people file bankruptcy! Couldn’t you say that if they did the opposite then bankruptcy would never become in issue? Do something different, get something different!! It is as simple as that. People are filing bankruptcy to avoid the problems that they created and instead of owning up to the outcome they decide to make someone else take the hit! That is absurd to me. Usually I hear, “Well Dave Ramsey filed bankruptcy.” These are the people that are simply avoiding the truth of the matter. YES, Dave filed bankruptcy but he also REPAID all of the debts he filed bankruptcy on. That’s integrity!! He was also in MORE debt than MOST people.
How To Take Responsibility For Your Actions To Avoid The “B” Word, using some of Dave Ramsey’s Baby Steps
- STOP BORROWING MONEY! NOW! (You are making the fire BIGGER with every dollar you borrow- PUT OUT THE FIRE)
- Get yourself on a REAL budget. Pay your four walls FIRST and your credit cards LAST. (Here is something new you can try- SPEND LESS THAN YOU MAKE!! Who knew common sense and personal finance were related?)
- Consider getting a second job. (Not fun, but not to worry- just think about all the fun you had while running up ALL that debt. Now it’s time to get SERIOUS!)
- SAVE $1,000 FAST! (I don’t want to hear that you can’t, because I know there are several ways you can- Cut the budget, cut grass, deliver pizza, deliver papers, sell on Ebay and consider selling your BORROWED CAR, and buy a beater. If you say you can’t then you will never try.)
- Pay off your debts (except the house) from smallest to largest using the debt snowball method. Dump anything you can to knock down your debt pile. (Keeping the things that caused the problem is insane! Let’s see – Keep the house because you like it OR declare yourself BROKE? I hope you like the house!!)
- SAVE 3/6 Months of expenses. (The Rainy Day Fund – It’s gonna RAIN.)
- Save for College and Retirement (Help your children avoid student loans and ensure you are not eating Alpo at retirement because Social Insecurity WILL disappoint you.)
- Pay off your Mortgage with Gazelle Intensity.
- Build Wealth and GIVE! (If you have no payments you will be able to build wealth “SCARY FAST”, and GIVE like never before.
You will be glad that you did not file bankruptcy. I sure am!! Now go take control of your life and your problems.
Bankruptcy – The NOT SO GREAT Escape!
It is really quite simple. You borrowed the money and you need to pay it back. Why should someone that loaned you money have to take the hit because you finally decided that you have borrowed too much and the only way out is to NOT PAY ANYONE? Harsh maybe but let me point out that as I considered bankruptcy many times, I was just as harsh on myself. Not to mention I had some great advice from some great people.
Take responsibility for your errors in judgment and decide to clean up your mess! You will be so happy that you did! The lessons you will learn a long the way will be life changing! This is not a consensus, it’s just one man’s opinion.
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{ 4 comments… read them below or add one }
Can I hear an AMEN! AMEN BROTHER!
Having just read Maxed Out, I will say that his sources show that 95% of all bankruptcies are filed by people who are truly broke. But how did they get that way? How can you be broke when you make $70K annually?
We were among those, making well above the average household income, but on the edge of that cliff that was built out of greed, insatiable appetites for new toys, wanting it all now, and not wanting to build up our foundation first.
We were poised to jump into that rocky ravine that is bankruptcy, then we found FPU. It pulled us back, gave us a new way to look at things, allowed us to reorganize our priorities and the way we spent.
While we are still “broke” right now, we are able to pay for everything we NEED to in a month and are slowly plugging away at our debt without incurring any new debt.
It is hard, but it is working, and we can see the light at the end of the tunnel, and it’s not 10 years away like it would be with a bankruptcy.
Thank God for FPU right?
I am so glad I had people in my life that were able to get through to me about why bankruptcy was a bad idea.
While looking at your site I was interested to see your take on bankruptcy. Spot on, it is painful just been there. From my limited perspective I must say it was no morning after pill as you referred to it. It was a long painful process that made us really know our own business. With as out of touch as we were with our finances I must say it was a wake up call that shook us out of our complacency. We have taken on dependent family members and are now raising our granddaughter…yes, financially draining but a moral imperative for us as well. Are we at fault?…well yes, if not for our stupidity and our actions then we would not have been there.We were hugely overwhelmed and we are not off the hook, we are paying back taxes etc. Thank you for your time.
Hi Ari,
Thanks for visiting and thank you for taking the time to comment. Sorry to hear that you had to go through such a painful process but it sounds like you are now on the right track. I may not have made it clear enough in my blog but when I wrote it I was really referring to people that used it like some people use morning after pills, filing for bankruptcy multiple times and not really seeing the need to make better decisions. I think that was a direct result of being able to file for bankruptcy so easily at one point. I personally know people who have filed three and four times in their life, and I have not ever heard anything from them that would suggest they are remorseful for leaving someone else to take the hit financially. I was also mainly referring to the fact that some people really do not need to file bankruptcy, but instead of pay their debt off, they choose to take the bankruptcy option. For those people bankruptcy is easier than paying off the debt, and that is why they choose it. I do believe that bankruptcy is sometimes the only way out but I must add that I also feel that just because someone files bankruptcy doesn’t mean they can’t pay the bills at a later time when they have corrected their situation. Dave Ramsey did that on millions from his bankruptcy and I just think that is AWESOME! Good luck with your new found path and I wish you the best!
Thanks again for sharing your experience and I hope you continue to read EOD.