Would you like to read about my journey considering bankruptcy, learning about the advantages and drawbacks of bankruptcy because this might be useful for you?
5 Reasons Bankruptcy Might Be A Really Bad Idea
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With $660,000 in debt and $8,700 a month in minimum payments, I’ve been continually borrowing money the last few months just to make the minimum payments.
I’ve been considering declaring bankruptcy.
I went to see a bankruptcy attorney to get some help and advice on what to do about this.
She suggested that if I wasn’t able to make the minimum payments, then it would be wise to declare bankruptcy.
Now the downside is there’s actually a lot of reasons not to declare bankruptcy and that’s what I’m going to talk about here.
I put a video up before saying, “Should I declare bankruptcy?” and now I’ve thought about it. In fact, for a few days, I considered it when I was planning to go forward on it, but here are several things I’ve learned that are bad about declaring bankruptcy that might not be obvious.
Now, bankruptcy, especially if you’ve got a business, is not just as simple as, “Okay, I declare bankruptcy and everything’s wiped out.”
First of all, there are things that bankruptcy will not clear out and in fact out of the $660,000 in debt that my wife and I have, bankruptcy would only take out about $58,000 because it would only take out these out of all this debt.
It would only take that out of the big picture.
Student loans cannot be impacted by bankruptcy generally unless you go through an extra arduous process to get that done and therefore that is over…
How much is that exactly?
If you look at this exactly, it’s $189,000 of our debt in student loans and if you add the mortgage onto it, this is $452,000. The debt is actually by either student loans or mortgage.
That means that none of those would be impacted by bankruptcy.
Further, for me, I’ve got all these business loans. I have $148,000 in business loans and none of these would be impacted by declaring personal bankruptcy.
The only way for me to get out of these would be to declare bankruptcy for my business and if I declared bankruptcy for my business, I got to shut it all down.
I could just declare bankruptcy, get out of it and start over freelancing or something like that online.
However, it seems like a really stupid long-term idea to declare bankruptcy on my personal when I have a business and that wouldn’t even impact the business.
What gets even more, is looking deeper into what would it mean to declare bankruptcy for my personal life.
What that would mean is I would end up needing to do things, sell one of my cars. The other car is secured by a business loan, so personal bankruptcy wouldn’t impact it.
Then, I would end up needing to sell potentially the trustee.
When you declare bankruptcy, there is an estate and given I’m married, that can impact my wife and her jewelry could even be potentially sold off because even though she wouldn’t be filing, the bankruptcy trustee might have the ability to force us to buy back her jewelry at whatever price is reasonable for it and the bankruptcy can end up costing us at a bare minimum thousands of dollars to pay the attorney.
Then additionally, bankruptcy would result in my car being sold. The one car I have, this already paid off for thousands of dollars and months of ongoing things to do.
I had massive paperwork that the attorney sent me over to do the bankruptcy, then completing all of that, I would have court dates to go to, a meeting with my creditors.
There are all kinds of uncertainty around that and for me that equals to a lot of lost time and productivity working, given I can’t just declare personal bankruptcy and get out of my business loans, and given if I declare business bankruptcy, I have to stop doing all the stuff I’m doing online.
It seems critical that my business continue operating and making money, especially since even with bankruptcy, so many of these loans would not at all be impacted.
Even with bankruptcy, the minimum payments would still be $7,000 or more a month on my debt.
Thus, declaring bankruptcy is a guaranteed expense of thousands of dollars to pay the attorney the filing fees, a guaranteed taker of my time and energy, and that to me, seems like a really bad idea given I have the ability to make so much money with the time and energy I put into my business.
If I’m declaring bankruptcy, that’s taking time away that I can go to my website and it actually improves the quality of my online courses and make it more likely someone might actually buy an online course or my partner program and that generates money, then that’s money I can use to pay down my debts.
The question is then, without bankruptcy, what are you going to do?
I talked to Laura about this, my wife, and she said that she was hoping she was guiding me towards bankruptcy because she was hoping it would help me or force me to go through my life and cut my expenses to the absolute minimum.
Even with all of this debt, I’ve still been getting things like massages every week. I’ve still been doing personal training. I still hadn’t taken 10 minutes to call my internet provider and see if they could lower the bill, which I did yesterday, and they lowered the bill by $136 a month and increased my internet speed.
All they did was take away the phone line that I haven’t even used that they told me a year or two ago I had to keep that because it was the same price essentially.
That, singlehandedly saves thousands of dollars a year, and it only took 10 minutes. I went through yesterday or the day before, whatever it was, and I canceled my massages. I canceled my personal training.
That will save me $1,000 a month and that’s enough to make the minimum payments on all those credit cards and everything I would get out of by declaring bankruptcy without having to spend the money.
Then the next step is, I’m going to sell my car, and selling it will make the minimum payments for several months.
I’ll go through and sell some more of the stuff I have in my studio that I’m not using and the beauty of it is, I can go through and do this stuff fairly quickly, and then focus on making more money in my business.
I’m so grateful that, after Laura talked to me towards bankruptcy right at the last minute when I was just getting ready to do all the paperwork and canceling all my automatic payments. I felt like such a jerk canceling all my automatic payments because I borrowed all this money.
Nobody made me borrow this. I borrowed it with the intention of repaying it. I borrowed it knowing exactly what all the interest rates were and I felt awful about going through and canceling all the automatic payments that come out of my account every month.
I felt great about setting all those automatic payments backup.
Laura came to me at the last minute and said, “Look, this is really why I wanted you to declare bankruptcy, so you would just cut back everything you possibly could, and you’d figure that out yourself.”
I realized that when I declared bankruptcy with all my credit cards cut off, I would still have $1,500 a month in personal expenses. Things like health insurance, things like the car insurance. When I sell the car, that will knock down the car insurance over a hundred dollars a month. That will be a big saving to just insure one car instead of two.
We don’t need two cars since we both work at home and I can walk to my AA meeting, walk to the grocery store and walk to Laura’s parents house and sister’s house.
Why do we need two cars?
It just seems excessive.
And Laura said she was hoping I would be willing to do whatever it takes and the bankruptcy would not allow me to just keep spending over what I was making. We had a good talk and I said, “I see what I’m going to need to cut declaring bankruptcy. Why don’t we just cut all this stuff and not declare bankruptcy?”
Because in the short term, bankruptcy would actually make things harder.
The finances are going to get a lot easier once this business loan is paid off and that will be paid off.
You notice this has a high minimum payment and a balance that you can calculate will be paid off in about four months, and I did this several weeks ago, so this will be paid off in about three months from now.
Thus, we just need to hang on and survive until that big business loan is paid down. I need to focus on making more money by giving more value in my business, and then I’m in the position to make much more than the minimum payments on all these personal cards.
I will get rid of all these personal credit cards, then dig into all this business debt. When the business debt is down, then finish off the student loans, and then the mortgage, and we will be debt free.
That is a plan that I love.
I was thinking about and looking at all this bankruptcy, and I don’t love that.
In fact, I hate it.
I am grateful it’s there, but it doesn’t seem like something that I should use.
My own conscience has gotten very loud lately and it said, “No, this is not appropriate.”
Now, if I had been months behind on my bills, if I did not have very much earning potential, if something extremely bad had happened, then that’d be different, but it hasn’t.
The only reason this much debt exists is because of my spending decisions, and you could say Laura’s decision to go to law school and borrow all those student loans for law school.
Still, the main reason we’re in this financial situation is because of my spending decisions. It’s time for me to change and I am changing.
I’ve been scared because I love getting massages. They were one of the first things when I got sober that I tried that really helped me to relax, and then I’ve become dependent. I have to have a massage every week or I won’t be relaxed and I see maybe what really made the difference is trying something new.
Maybe it was my willingness to try something besides going to the liquor store at 90 days sober that really made a big difference. Now, there’s no doubt massages are very relaxing, but I’ve actually been getting stressed out lately because the massages take two plus hours every single week.
By the time I drive there, do my 90-minute massage and come home, and lingo around talking to people, they cost about $600 a month by the time I pay for the massage and the tip.
If you add all that, that’s $600 a month that takes eight hours and I charge hundreds of dollars an hour for clients.
That’s eight hours I could be making money and I could find other ways to relax.
I’ve been scared. I’ve been dependent.
I see that it’s an opportunity for me to improve and do better.
As Laura says at this point, taking care of my finances is self-care. Taking care of my finances and not being all afraid and upset over the finances like I’ve been most of this year, that is good self-care.
In fact, I was so close to declaring bankruptcy, I had a video scheduled on this exact day and I just deleted it and I have replaced it here.
I’ve put this up here to share what I’ve learned about the bad sides or downsides of potentially declaring bankruptcy because everyone’s situation is unique and I’ve heard other people, it made complete sense for them to declare bankruptcy.
I didn’t even mention the credit score or credit because I’m aiming for a debt-free cash only debit card lifestyle.
This credit card, personal loans, student loans, mortgage, just borrow money and keep borrowing money to have what you want and pay for it later, that’s got to stop.
It’s got to stop because once you get it started, it can be very difficult to completely stop it.
“Oh, I bought some student loans. Well, why don’t we get a house now? While we’ve got a mortgage and the student loan payments are so high now, our income’s not enough. We need to get some credit cards.”
“Well, now the credit cards are too high. Let’s get a personal loan to consolidate.”
The personal loan, the mortgage and the credit cards, plus the student loans, all add up to a lot and it’s the first loan that gets you in debt just like in AA, it’s the first drink that gets you on your way to be a drunk, it’s that first loan I got that put me on my way to be in debt.
I see that for me declaring bankruptcy is not appropriate, not at this time.
I’m so grateful for all the love and support, the comments, very passionate comments and messages I’ve received recently suggesting what I can do, and I’m very grateful for all the prayers, love and support.
Thank you very much for hearing the reasons why bankruptcy might be a really bad idea, and I hope this has been helpful for you.
I love you.
I appreciate the chance to serve you today and I will see you again soon.
Edits from video transcript by Michel Gerard at www.michelgerardonline.com.