Bankruptcy Pros & Cons

Most people who are halfway honest like to keep their financial agreements and pay their bills whenever possible. We feel better when we are able to meet our obligations and keep on top of things.

Life, however, sometimes gets in the way of our plans, and like a powerful ocean undertow, can pull us down and we begin to drown. Unexpected things happen such as illness, injury, or loss of a job and before we know it, the bills keep piling up and sleepless nights set in. Creditors begin calling, credit scores gets ruined due to late payments and the bills fall further behind. Pretty soon, the only bills that get paid are the very basic ones, food, rent and utilities. This creates more tension for everyone involved, the husbands, the wives, and it most certainly affects the children. It is a known fact that most divorces occur due to financial problems in the family.

IS BANKRUPTCY REALLY MORAL?

Many people who have come into my office to file bankruptcy have asked me “Is this really the right thing to do, is it moral?” The answer is yes, it sometimes is the best option. The concept of bankruptcy actually dates back to the time period of the Old Testament. It refers to the ancient Hebrews having their debts forgiven every seven years. There comes a point when a person has to ask himself, what is more important, my (or my family’s survival) or going under. Discharging one’s debts IS sometimes the more ethical and moral solution.

When things have turned around and one gets more affluent, he can then repay some of those debts or make donations to charitable organizations to offset any feeling of indebtedness to society. One would also want to ensure that the situation did not happen again and get further educated on handling finances and money.

ALTERNATIVES TO BANKRUPTCY

Other alternatives do exist, for example debt consolidation or negotiation.  If your financial downturn is temporary and you have not really fallen very far behind, you can even try contacting your creditors yourself to see if they will work with you. Or you may have the option of borrowing some money from friends or relatives to pay off the debts.

ADVANTAGES OF FILING BANKRUPTCY

One of the main advantages of filing is that it takes the immediate overwhelming amount of stress out of the picture as creditors will stop harassing you and you can put more attention on being productive to handle life, your job and your family. There are different kinds of bankruptcy filings and the correct one would have to be determined based on each individual’s situation. Filing bankruptcy is a form of responsibility of handling debts and one should be able to look at it from that viewpoint. A bankruptcy filing can also stop wage garnishments. If you are facing a foreclosure on your home, it is wise to not delay a filing so as to prevent losing your home. If you have tax problems, again filing sooner, rather than later can prevent more problems and complications from occurring.

DISADVANTAGES OF FILING BANKRUPTCY

A bankruptcy will affect your credit and will stay on your report for ten years. (Spouses by the way, can be kept off of a bankruptcy if so requested, depending on the type of bankruptcy you need to file.) A person may feel embarrassed or may feel a blow to his pride after filing, but this not unusual.

As long as one continues to take action to better his life, and recognizes that life goes on, he will pull through regardless.

Per the law, you have to list all of your debts, be they personal, or to companies. For personal ones, I suggest you tell the people what you are going to do and let them know that you will repay them after you get back on your feet.

THE LONG TERM RESULTS

Bankruptcy basically gives you a “time-out.” Time out to get another job, time out to get back to a better state of health, time to do what you need to do to get your life back in order so you won’t wind up back in the same situation. It also gives your credit a re-boot or fresh start. Just keep in mind that sometimes we have to look at what is the best solution that will offer the most advantage to all concerned so as to keep life going and in balance so we can then put our attention on the brighter roads which lie ahead.

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Gerald McNally is an attorney and real estate broker who specializes in family law, bankruptcies, business litigation, estate planning and tax preparation located in the city of Glendale CA and is licensed to practice in the state of CA.

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