Should I file for bankruptcy?

Let’s break down any negative stereotypes right now. In my nearly 10 years of counseling I have NEVER seen someone that got into debt willingly and knew bankruptcy would be the result. Debt is like the killer in a horror film... it may seem slow, but like Jason Voorhees, debt catches up with you almost every time. While some people are able to pull a MacGyver and get out of tight jams, the reality is there are a lot of people out there that just can’t.

In case you've never watched the SNL sketch, MacGruber, he was the not-so-effective version of MacGyver. MacGruber tried hard to get out of his perils, but personal issues and immediate stressors made it hard for him to follow his plan to fruition. This can be true of people in debt; not everyone can simply put the rest of life aside and do everything that is needed to fix their finances. The truth is finances affect everything and sometimes there’s not enough time and money to fix the problem. 

So how would you know if you can be a MacGyver vs. a MacGruber? Ask yourself the following question; really sit and reflect as your initial gut reaction may not be right. Can you go without charging AT ALL and still pay everything that needs to be paid?

If the answer is yes, great! You may be a MacGyver and need some duct tape, a toothpick, and a little Debt Management Plan (DMP) to get you out of the dangerous spot you are in.

If the answer is no, consider if you could manage to not charge AND still make credit card payments if you made some changes. Remember the rule: multiple small changes are more sustainable than a few large changes. So look for areas that you can reduce $10-50/month. It may not seem worth it in just one area, but after cutting out some lunches and dinners out, reducing a few coffee shop trips, and shopping for better rates for cable, insurance, and cellphone packages suddenly you may find there’s an extra $100-$200 that is now available to make your budget work.

After all that if the answer is still no, ask yourself if you could make it without charging AND without paying on the debts. If you didn’t have to pay for credit cards or charge on them, how would that impact your finances? Would everything be affordable?  Would you have at least $25-$100/month left over for savings to use in emergencies?  If so, then it’s likely time to talk to an attorney about what bankruptcy may look like for you.

The beauty of bankruptcy is that even though things seem dire, it isn’t the end! You can learn from what happened and move forward with a fresh start to rebuild your budget, your credit, and regain financial control...instead of every MacGruber sketch where it ends in an explosion. LSS counselors like me can help you create a plan for financial stability.

Because having a plan before you move forward is almost as valuable as a paperclip and bubble gum are to MacGyver when he’s defusing a bomb.

Remember that bankruptcy should always be your last resort because it will hurt your credit significantly. There are different types of bankruptcy and people's situations are different. So if you're thinking about bankruptcy, be sure to consult with several local attorneys about your options and what bankruptcy would look like for you. Also, be sure to price shop for affordability.

If you think you can avoid bankruptcy and pay on your debts, the Debt Management Plan could be just what you need to help eliminate your debt for good. With on time payments, you would be debt-free in 5 years or less. What would your life look like without debt and the stress that goes with it? Give LSS a call at 888.577.2227 today to determine if the DMP is right for you. Financial counseling sessions are free and confidential. 

Author April Sanderson is a Certified Financial Counselor with LSS Financial Counseling and she specializes in budget and debt counseling.