I listen to the Dave Ramsey Radio Show every once in a while on my way home from work, and one of the most common topics I hear from callers is the question about bankruptcy. So many people call in for advice about whether or not they should file for bankruptcy. Ramsey, having gone through a very messy bankruptcy himself 20 years ago, almost always talks people out of filing for bankruptcy. There are some cases where bankruptcy is the only option, but after listening to his show for a while now, I’ve realized that bankruptcy doesn’t need to be the first option for someone in serious financial trouble.
But bankruptcy sounds so easy, right? You hire an attorney, they file some papers, and your slate is wiped clean. Well, it’s not quite that easy, and many people take filing for bankruptcy lightly nowadays. Here are three reasons why you should try to avoid bankruptcy at all costs.
- You’ll be dropping a bombshell on your credit. The bankruptcy will stay on your credit report for 7 to 10 years, and you’ll be treated like an untouchable when it comes to getting a loan in the future. The only people you’ll attract are sub-prime loan sharks. The worst part is that it will take at least 3 years to be bankable again for a mortgage. You’ll need to pay for everything on time and not slip up ONCE if you want to think about buying a house after a bankruptcy.
- It puts an emotional strain on your relationships. You’ll be getting sued, dealing with attorneys, and going to trial hearings. It’s not a walk in the park, and if you’re married, it will definitely affect your relationship. Ramsey is very candid about the fact that his marriage was hanging on a shoestring while they were going through a bankruptcy and raising two kids. It’s not a fun and easy process. It’s not the “start over fresh” feeling that some portray it to be.
- It Can Be Expensive. That’s right, filing for bankruptcy isn’t for free, and if you want to do it right, you’ll need a decent attorney to handle it for you, and attorneys aren’t free! If you don’t use an attorney, you leave yourself vulnerable to possible liability for debts you can’t pay. Remember, it can be expensive to go broke!
Most people don’t need to file bankruptcy to get out of their financial mess. Most times it only requires you to get organized, take control of your life, and start systematically paying off debt. Get on a written budget, work another job, sell a bunch of stuff, and get your debts paid off. It sounds so simple, but the hard part is overcoming the person that got you into this mess…yourself. If you can overcome yourself and make wiser decisions, you can win with money and avoid bankruptcy.