Bankruptcy – A Solution, A Cop-out, Or An Enabler?

bankruptHave you ever considered filing bankruptcy to resolve your financial crisis? I know I have, but was so very glad that someone who cared about me decided to speak up. Determining yourself to be financially incapable is nothing to take lightly, but it seems that these days, filing for bankruptcy is no different than having your teeth cleaned.

I refer to filing for bankruptcy as the equivalent of taking the morning after pill to prevent unwanted pregnancy, and here’s why. The fact of the matter is that in both cases, someone wakes up one day and suddenly realizes “Hey, I shouldn’t have done that”.

The time to consider the consequences is before the act—not after. Just like someone should make responsible choices when deciding to have sex, they should also consider the consequences that running up a bunch of debt could bring. In either case, the outcome can be disastrous.

I always feel the need to make it clear that my intentions are never to disparage anyone who has filed or thought about filing. My only intention is to help those who I may be referring to, see the truth that they are not bankrupt at all—they most likely just have a mess to clean up.  I also think that we have an obligation to repay what we owe, no matter how inconvenient the mess may be.

I believe that this topic needs to be discussed more often. I talked my sister out of filing bankruptcy just a few months ago. She has a little work to do to clean her mess up, but she is so glad she didn’t file. The truth was she wasn’t bankrupt at all, she just needed to change her habits and behaviors in order to turn things around. Her lifestyle was bigger than her income so she had to down-size. She had a hefty mortgage and was behind—the bank accepted a short sale without recourse. She had car payments that were eating her alive—bye bye cars.

There are times when someone really has no other choice to file, but it’s not because they owe, $50,000, $75,000, or even $100,000. When you are truly bankrupt, it will still be your LAST resort. Even then, it may resolve your legal obligation but does it resolve your moral obligation? A topic for another post but I would like to point out that Dave Ramsey filed bankruptcy on over a million, and still he returned after rebuilding his wealth to repay those he had previously owed.

This article was inspired by one of my good friends who I deeply respect. He told me that one of his financial goals for 2010 was to file bankruptcy. Say what? :) I care enough about him that I decided to interject.  We had a great conversation about it.

The trouble is society enables a false sense of security by gladly accepting bankruptcy as a part of life. Too many people believe that bankruptcy or even debt consolidation is the solution to their problems, but that couldn’t be further from the truth. Allow me to explain.

Is Bankruptcy A Solution?

If by solution you mean your troubles will completely vanish—NO, IT IS NOT! This entire blog is about financial behavior and habits that heave us into a dark hole, when really all we had to do is plan for and avoid falling into the hole in the first place. Saying bankruptcy will solve your problem is like saying sweeping dirt under your rug means you have a clean floor.

The dirt still exists, just like the behaviors that caused you to find yourself feeling financially incapable still exist. Have you ever known someone who filed for bankruptcy and still ended up racking up a bunch of debt again? I do. I even know people who have filed bankruptcy more than once and STILL they do not see the folly in this cycle of slavery.

Bankruptcy does not solve anything! It hides the problem and gives the false impression that the problem is gone. The problem isn’t that you have a bunch of debt, the problem is “WHY” you have a bunch of debt.

Cause and Effect:WHY” (<~~ your behavior) you have debt is the cause, and the actual debt itself is the effect.

Is Bankruptcy A Cop-out?

I believe that the average person would not admit that it is a cop-out. They would instead claim that it is a necessary financial move in order to regain control. You wanna know what I think? It’s very much a cop-out! Whether or not someone realizes it to be one does not matter.

The truth is that cop-out is defined as: 1.) A failure to fulfill a commitment or responsibility or to face a difficulty squarely. 2.) A person who fails to fulfill a commitment or responsibility. 3.) An excuse for inaction or evasion.

So no matter what the reason or justification you have for filing, by definition it is considered a cop-out to do so. You have decided NOT to “face your difficulty squarely”, but instead to totally avoid any and all responsibility to keep your commitment. Something to think about at least right?

Is Bankruptcy An Enabler?

Filing bankruptcy enables you to avoid the true problem—your behavior. It gives you a false sense of accomplishment when really you have done nothing but avoid responsibility. I know that may seem harsh to sensitive and politically correct ears, but I feel that something should be called what it is. Trust me when I say I hold myself to the same level of scrutiny, even if I sometimes suffer from denial in the beginning. I am hard on myself when I am wrong, sometimes to a fault.

Furthermore, by not saying what I have said I believe that I would be enabling you to continue to believe that bankruptcy is just a way of life. That there is nothing wrong with evading responsibility if it means that you benefit.

Here’s another definition for you to chew on.

Integrity – adherence to moral and ethical principles; soundness of moral character; honesty. (I would like to add: REGARDLESS of whether or not it suits you at the time.)

In other words, even if it benefits you at the time to relieve yourself of any legal obligation, you should still repay your debt. Avoid bankruptcy.

What IS The Solution?

Getting your hands dirty! Humbling yourself to accept the fact that you made a mistake and may have to work a little harder to clean it up. Realizing that you are where you are today because of the decisions you made yesterday.

Get out of debt by yourself and with a clean conscious. You owe someone money, and they deserve to be paid back.

Here’s what you have to do to truly resolve your situation so that you never return:

In the precious words of my self-reliant 3 year old:

“Look Daddy, I did it all *bys myself!” (*spelled the way Isaac says it—wrong but so darn cute!)

In the words of a proud daddy:

“Atta boy!”

Now go get yourself out of your own mess! You will feel so much better after you do.  It is very rewarding to know that you accomplished something you saw as, or that others claimed to be impossible. I believe in you and your ability to do this, even if you do not. Do not sell yourself short, or the person you owe the money to for that matter. And finally, do not believe what society has marked as “acceptable”, instead prove it wrong! Face your difficulty squarely!

About Brad Chaffee

15 Responses to “Bankruptcy – A Solution, A Cop-out, Or An Enabler?”

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  1. Ken says:

    I’m right on with you on this one. Folks look to quickly for this ‘bailout’ and emerge using the same bad habits that got them there to begin with.

  2. Shannon Lutz says:

    I also agree 100%! Thanks for being bold and courageous to speak out and advise the people!! That takes incredible guts but you handled it very wisely. There is no need to side step the issue here and that is that we should all make wise decisions with our $. I am pledging to give up eating out for the next year to use that money to pay off my car. I want to have it paid off in a year.

  3. Brad Chaffee says:

    Exactly right Ken! Thanks for posting!

    Shannon – People hate the truth, but the problem is that the truth will set you free. :) I like your financial goal btw! Good luck, I know you will rock it out!

  4. Jen says:

    As a person currently going through chapter 13, I agree with this 1,000% and have had to admit to myself that it was my behavior (and RE market) that drove me to this situation. This decision was not a light one to make, but I also had to look at the future and realize, i needed to stop acting like a gerbil in the whee: spinning but not going anywhere. After trying to pay down debt which was initially 10K from 5 years ago that escalated to over 35K (due house repairs, car repairs, and illnesses) I finally realized, I needed to get off the wheel and get some “help”. This help is not a wash away and start over, this help will enlist 60 payments in order to repay my debts. In retrospect, I wonder if I would have been better off negotiating with each lender and settling the accounts but it’s too late.

  5. Yana says:

    I completely agree that people who use bankruptcy are often acting carelessly, because society says it’s the thing to do. It is necessary far less often than it is used. The bottom line is that if one qualifies to file bankruptcy, one does not have to pay – whether or not he files. I think it’s folly for a person who cannot pay his debts to pay for a bankruptcy. I would define “last resort” in regards to bankruptcy as filing when a creditor has begun taking something from you. At that point, filing can possibly get back what has been taken and prevent it from continuing.

  6. Jim says:

    Also as someone who is in Chapter 13, I agree. I have a bad mortgage with a bad bank, I tried for months to work something out with them, but couldn’t get past the kids they hire to answer the phone. That house is my retirement and I was not going to let it go without a fight. It’s hard to take on an opponent when you can’t even get them into the ring. By refusing to work with me, the bank made both of us lose.

  7. Mikki says:

    I almost filed bankrupt 2 years ago but instead I spent the money on taking financial peace. I figured if THIS didn’t work then I would file. 2 years later, extra jobs long hours downsizing and changing all my habits, I have everyone almost paid off on my own :-). Its the best choice I could have ever made.

    Brad check out my blog for today! I helped talk this lady out of filing bankrupt on her business over the phone !!! it was so freaking awesome. I felt like Dave for a moment and I was saying things like “lets just say that out loud” lol. They didn’t have an income problem, she just didn’t know how to deal with bill collectors and how to take care of the 4 walls first. I was so proud of myself and she had good things to say after 2 hours of trying to talk her trough it. I am going to add going through dave ramseys elp training for counseling cuz if it takes me two hours to talk someone into something good we got issues lol.

    it was so fun tho I wouldn’t trade that experience at all!!

  8. Most excellent post Brad! And so relevant to a post that’s going up on Monday.

    Best is to just let the government take care of us, forever, and ever, and ever. Why bother working hard when the gov’t is starting all these new great programs, and taxing the rich to help support us?

    Ohhh… gonna love the debate on Monday.

    Stay warm buddy!

  9. Tracy says:

    Great post! I thought about bankruptcy when I first hit the wall of debt I am paying off now. In fact, I had more than one friend suggest it. I realized, however, that I needed to take responsibility on my own. I make decent money and have lots of overtime potential, so I decided to do it the hard way. I had to short sell two income properties and the process (banks wont work with you until you stop paying them) killed my credit rating, but that gave me the impetus to stop relying on credit to meet expenses. Habits are tough to change but I am slowly making progress.

  10. So when are we going to have the intervention with the 1 million + Americans who claim bankruptcy every year?

    Liked the analogy of the morning after pill – so true.

    I read somewhere that credit card companies actually want bankrupt customers because they’re the one’s with the worst habits and the one’s that can’t file bankruptcy again. Bankruptcy is like a lot like health care, fighting the symptoms, not the disease.

  11. TechEntre says:

    I would say that it could be the smart and proper move, depending on your situation. Most people that manage their finances responsibly won’t end up in that situation, but for those that do outside of their control (somehow), it is the ultimate last resort. But a valid last resort.

    But I get your point, a lot of people use it as a way of avoiding the original problem. But it won’t help you with federal student loans or tax debt!

  12. Cindy says:

    Ok I read your blog from 2008. Can you help me? This is my situation cause I’m abt to file if I can’t figure something out. Had to file 23 years ago after my husband had to have open heart surgery and I know how hard it is to build back up. I have had good credit for all those years and It’s killing me now. I own a art restoration company that I run out of my house. I’m 64 and in horrible health. I tried to hire a helper but couldn’t afford to keep her even though she and I will still try to work together if I can pay her. My husband is a bipolar, paranoid hoarder who’s been on disability for 23 years. He started making bullet keychains and I let him sell them online using my name. He’s always lost money. There are 6 people living at my house. Besides me and my husband, there’s my daughter who is morbidly obese with health issues and her two children, one of whom is autistic, and her boyfriend. She hasn’t worked for years and he can’t find a job since he’s a convicted felon. He’s been trying for almost a year and no one wants him.He gets so close and then they turn him down. I’ve helped him buy tools, clothes, etc so they’ll give him a job and they always back out on him. My husband gets $1283 in social security disability and I drew my ss early cause we needed the money. My house is paid for but owe this years taxes of $800. My business was doing great until I had what we all thought was a heart attack which turned out to be a stress attack. But the hospital bills, even discounted since I have no insurance, were over $7500. On top of this extra money owed, my daughter had a wreck a year ago and totaled my paid for car and now I have a $400 monthly car lease. And on top of that, the electric company put in a new meter, our house is very old and the meter was too and ran slow ( the bill was very low too) so the amt jumped abt $400 a month. And then my knees and back started giving out and I’m having a real hard time with my memory.Scary ,really scary. And I have fibromyalgia and severe conditional depression.So now I can’t pay just the necessary bills not counting credit card debt. I know it’s been going on a while cause I was using the credit cards too often for the last few years. I talked to AT&T abt getting out of our contract to buy pay as you go service and it’s over $1400 to do that. This month I could only pay half my utilities and am working to make enough to pay the balance. I bring in abt $800- $1000 each month plus our social security income and my daughter gives me around $400 a month, her childcare check. Total around $2800 a month. Daughter gets $450 food stamps but that doesn’t last long especially as one of the grands is a teenage boy. My debt each month at minimum payment is abt. $3600- $3800. And that doesn’t include gas, medicine, clothes, dog food, etc. I do have an order I’m working on that’s $6000 and my IRS refund should be abt $1700-$2000. No one in my family can help me with my work. Daughter is 4’11” and basically round. She can’t reach a lot of the work I’d need done. The boyfriend is doing repairs on the house when I find some money since my husband doesn’t give a …. about the house or it’s upkeep and hasn’t for years. He’s no help at all. And I don’t think the boyfriend has the right “touch” to be handling fine old antique paintings and frames. He’s kinds rough around the edges but a good male role model to the grands since their dad decided not to be in their lives. So- what do I do?

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