Earning your way out of debt is much like the process of dieting. To lose weight you can choose liposuction over dieting and exercise, but in doing so, the solution is just temporary. If you do not change some of the fundamental lifestyle habits you practice, the weight comes back. Managing your way out of debt is comparable in many ways.
You can file for bankruptcy (akin to financial liposuction) but if you don't adjust your spending and saving practices, your debt (the heavy fat burden that weighs you down) will reappear.
Just as with a liposuction (or any other procedure), there is a bit of pain and discomfort with bankruptcy as well. It is better to avoid it altogether if possible, but at some point in evaluating your financial position, leveraging your change of financial habits with some effective financial tools (such as bankruptcy) may be a wise move.
The goal is not to shirk your responsibilities. As previously mentioned, wiping your debt without changing your behavior solves nothing. Many people are able to manage their way out of debt by containing their situation before it compounds. However, often times creditors include terms (or change terms) in your binding contracts that result in increasingly difficult bills to pay. If the situation gets bad enough, you can find yourself with no way out.
Now ask yourself this question. Even if you can manage to change your cash flow to effect a positive result, how long will it take you to eliminate the burden of debt? If your answer is "years", then consider how much time you are losing towards your retirement in order just to break even by climbing out of debt to "zero". By that time, you will likely have lost most of the benefit of compounding interest towards your nest egg. Is it worth it to lose your future security due to current debt? No.
In fact, bankruptcy laws exist, in part, to help people preserve their future security. Our legal system supports your right to prosperity in the face of those who would attempt to contractually indenture you to create an ongoing financial stream for themselves at your expense. Whether you got in over your head due to poor judgment, inexperience, an unforeseen change in circumstance, or by being a victim of predatory lending, filing for bankruptcy (Chapter 7 or Chapter 13) is a legal tool to level the playing field and cut your losses, so you can live, learn, and move on towards a better future.
True, some people abuse the system, and that has given the notion of filing for bankruptcy a negative stigma. Assuming, however, that you uphold higher values and are truly seeking to amend your situation (rather than use the system as a crutch), you really should not overlook the legitimate, legal resources available to you to do so.
Just the same, you should not undertake the process blindly. Take the time to get financial counseling on your debt. Find ways to curtail or reform your spending habits. Consolidate accounts and simplify where you can. Remember, wiping (or reducing) your debt through bankruptcy is not a solution in itself; it is part of a potential solution. The other part is a change in habits and practices. Many a lottery winner lost their fortune as quickly as they received it by mishandling money management through uncontrolled spending. When the money ran out, their spending habits did not change, and hence they ended up worse off than if they had not won the lottery in the first place. Famous athletes and celebrities find themselves in the same boat if they habitually spend what they make as they make it. Financial counseling combined with exercising your legal resources is imperative to prevent the same kind of trend in your household. Otherwise, history will repeat itself and you will be that much worse for the wear. At the end of the day, it's not the amount of money you make that determines your standard of living. It's the amount of money you keep, that can be applied towards securing your future happiness. Are you giving most of your money away in interest payments and fees to creditors?
Examine your finances. If you carry a significant, debilitating debt, it may be time to take action. The debt may come from a variety of reasons: divorce, stock market crash, college tuition, disability, a variable rate mortgage, credit cards, unemployment, the list is endless. Even if your cash flow seems to be improving, if every pay check is spent before you get it and the creditors keep calling back for more, what peace of mind do you have? What quality of life? And thinking forward, what provisions for your future are you making? A combination of debt reduction, financial consolidation, and education through a qualified counselor may be the smartest action to take right now. You have a life to live. Chasing your tail is not the way to live it.
The Galler Law Firm is a prominent Atlanta, GA, practice specializing in bankruptcy law for twenty years. David Galler is also accomplished and experienced in civil trial and workers' compensation, and has been at the forefront of the alternative dispute resolution movement. Visit the Galler Law Firm at http://www.gallerlaw.com. For more information on bankruptcy law practices, visit http://www.georgiabankruptcyattorney.net
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