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Bankruptcy May Be Your Smartest Investment and Quickest Way Back to Financial Health

Fear of the unknown, pride, uncertainty, misinformation, stubbornness, distraction, and cash flow are just some of the reasons that keep people from getting their financial life  in order with a bankruptcy filing.  The problem is that without it you may never be able to gain control of your pocketbook.

Making the choice to do nothing is the easy choice.  Your current situation is at least familiar, you’ve learned how to ignore your problems.  It’s harder to deal with your issues head on.

 But what if by meeting your financial issues head on means getting out from under your bill problems and jump starting your financial life?  Clearly, in that case it becomes far more attractive to leap than to stand still.

So if you’re having difficualty paying your monthly bills and are on the fence about what to do, here are  ten reasons for filing bankruptcy now that may help you make your decision.

  1. The stress you feel over being unable to pay your bills, having to constantly field collection calls and letters and the worry you feel about possible wage garnishment or bank account levies can destroy your health.
  2. The fact that the value of your real estate has decreased so substantially over the past few years may allow you strip off secondary liens, like equity lines, second mortgages and judgments.  If the value of your home increases in the future as the real estate market rebounds this option may not be available to you, thus filing a bankruptcy now rather than later could be much more beneficial to your long term financial health.
  3. You cannot be taxed on debt that is discharged in a bankruptcy, which is not the case with debts that you settle outside of a bankruptcy directly with your creditors. 
  4. You will be able to keep more of your assets when your federal exemptions are applied to investments you may have with depressed values. 
  5. The Federal tax exclusion for cancellation of debt on foreclosures of your principal residence expires in 2012, is limited in scope, and doesn’t deal with state taxes incurred for the debt cancellation.
  6. You cannot start to re-establish credit until you either pay off all of your debts, bring them all current and keep them current or discharge your debts in a bankruptcy.
  7. Relationships suffer in times of financial distress, the stress caused by unpaid bills, collection calls, law suits, wage garnishments, etc. takes its toll on a marriage.  So save your marriage by discharging your debts.
  8. If you wait to file until your income improves, you run the risk that the means test may require you to file a chapter 13 plan of reorganization , which requires a repayment of some of your debt; rather than being able to discharge all of your debt in a Chapter 7 now.
  9. You are not getting any younger.  Many clients are ill prepared for retirement.  Every dollar you are currently spending on making minimum payments to credit card companies is another dollar you could be saving for retirement.  Worse many clients raid their 401k or IRA accounts to pay debts with.  That is the worst thing you could do, even if a creditor receives a judgment against you they cannot attempt to collect from an ERISA qualified retirement account, which is fully exempt from creditor execution.
  10. Filing of a bankruptcy is not the black mark that most creditors want you to believe.  Bankruptcy filings have been up over the last number of years.  Chances are you know more than a few people that have filed a bankruptcy, even though it hasn’t been brought up in conversation.  Donald Trump and many other big businessmen file bankruptcies as a business tool so they can reorganize their business finances, why shouldn’t you use the same techniques to reorganize your personal finances.

For most people that are having financial problems these problems are brought on by an unexpected loss of income, which has caused them not to be able to pay their bills as they come due. Chances are that once you regain employment that alone is not going to solve your issues, as the debt has now become insurmountable since your creditors have now increased your interest rates and added late fees and overlimit charges making it impossible to catch up. 

For the reasons stated above the time to act is now.   By doing so, you put yourself in a position to move forward financially in a positive way by being debt free.  You can now use your money for things you want to and need to, like retirement and savings rather then living pay check to pay check.

The reasons most people don’t file bankruptcy is due to myth and misunderstanding.  Don’t be one of those people.  Consult a reputable bankruptcy attorney and find out how it can help you.

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