Although I have gotten out of the habit over the years of discussing this very important point with clients, I was recently reminded that perhaps pulling out old volumes of legal advice from days gone by and dusting them off might need to be considered. I was discussing debts with someone the other day and found myself listening to the following scenario:
“I have tried very, very hard to get my credit score back up during the last few years. I have scraped and scrimped everywhere I could in order to pay off many of the creditors that had been hounding me for years. Now, after all of that, I had one creditor that I had been hoping would “fall off” my credit as the debt was several years old, and then, suddenly, my employer notifies me of a garnishment! I’m devastated as I feel like all of that hard work is completely down the drain! I never thought I would find myself in a bankruptcy attorney’s office and I definitely DO NOT want to be filing bankruptcy because then everything I’ve worked for will be thrown out the window.”
Having heard this same lament innumerable times over the last 20+ years of counseling clients, I generally like to start out by saying as my response:
“Well, (and I hope this makes you feel a little bit better), I have NEVER had anyone come into my office and begin the consultation, interject during the consultation or end the consultation with the following statement: ‘I am so delighted to be here! You know, I woke up one morning about 5 years ago and thought, wouldn’t it be fabulous to file a bankruptcy in about 5 years!’ Of course not! No one every plans or sets a goal to file bankruptcy, whether chapter 7 or chapter 13. But, I love to let hurting people know that bankruptcy is there for a reason…..to get you RELIEF. And, in many cases, provide FREEDOM to rebuild down the road.”
Taking On Debt to Get Out of Debt
Now, on to the meat of this particular conversation: I was asked, “What if I could obtain a loan and try to pay off this debt or at the very least, negotiate with the creditor to accept less….wouldn’t that be better than filing a bankruptcy?”
Although it has always been our position that you should do everything you can to avoid filing bankruptcy, yet the one exception to that statement, in my opinion, is that it is NEVER a good idea to GET INTO DEBT TO TRY AND GET OUT OF DEBT! It has been my experience over the years that when or if one gets into the cycle of obtaining a loan to try and pay off another loan or credit card, the snowball has begun. We always have a world of great intentions to get the new loan paid off very quickly but, as I’ve said before, “Life is just a smidge unpredictable,” and as sure as you may be thinking you’ll have that new loan paid in full quickly, something else comes up, you start on a cycle of paying only the minimum payment on the new loan and before you know it, you may have borrowed $1,000.00 and a year or so later, you are still making minimum payments and have paid over $2,000.00 and the principle amount hasn’t budged.
So, I will go on record in stating that if you ask my opinion, I am going to tell you that the RELIEF that you may be thinking you will get by obtaining a loan to pay off other debt, may only put you in the prison even longer. (There are some exceptions to my rule that I will not discuss at this point.) Even so, I have found during my long history of counseling clients, that although somewhat frightening to begin with, often times filing a bankruptcy (either chapter 7 or chapter 13) may provide the FREEDOM that they have been longing for!
If you have been dealing with financial issues for far too long, take the time to contact the Bond & Botes location near you. We offer free consultation with our attorneys who will help you decide on which financial solution is best for your situation. No obligations, just help from a financial professional. Take the first step today.