If you’re in debt, you’re looking for answers – now. From late-night television commercials hawking the latest get-rich-quick scheme to credit counseling and debt settlement, you’re willing to try it all. Finally, you look at bankruptcy. But are you chasing the wrong thing?
Take the underemployed divorced guy with child support arrears and a mountain of credit card debts. He’s in danger of losing his apartment, the child support is piling up, and he’s barely got enough money to feed himself.
Does he need help? Sure. But he doesn’t need a bankruptcy lawyer.
The Difference Between Broke And Bankrupt
When you’re bankrupt, you’ve got debts you can’t handle. A credit card, medical bill, a car loan, mortgage … that sort of thing. You’ve got income, but it’s just not enough to cover your basic necessities as well as the payments due. So you hire a lawyer, reorganize your finances, and come out the other side of the process in better financial shape.
In contrast, you can be broke. That’s when you don’t have enough of an income to cover your basic necessities. Your income falls short of the rent, utilities and things of that nature. This is a situation that bankruptcy cannot fix.
Bankruptcy Can’t Fix Broke
If you file for bankruptcy when you’re broke, it’s not going to help you. Sure, many types of your debts will be discharged – but that doesn’t increase your income. If there’s not enough money coming in to cover your basic needs now, bankruptcy isn’t going to change that.
Instead of working to repay your debts, focus on increasing your income and reducing your expenses. Consider getting rid of your cable television and home phone, replacing them with plain-old rabbit ears and a prepaid cell phone for the short term. Do the Dave Ramsey thing and deliver pizza at night to pick up some money.
Do whatever’s legal and ethical to bring yourself out of the red and into the black, budget-wise.
Consider hiring me or someone like me to help you get the bill collectors to stop contacting you. It won’t solve the debt problem, but it will help reduce the day-to-day stress of collection calls and letters.
We’ll have time to chat once you’ve gotten yourself into a place where you can cover your monthly basic expenses. I know you’d like to get this solved now, but focus on yourself and your family before worrying about the other issues.
Make sense?