We often hear the phrase “bankruptcy should be your last resort”.
But where does this phrase come from? Is it true?
In my experience it is not.
This CNN story says bankruptcy should be your last resort, but the story doesn’t have any facts or arguments to back up that statement other than saying that it is bad for your credit rating.
This story and so many other pieces of media and culture we are bombarded with say that bankruptcy should be your last resort, but they never have any good reasons why.
Why do people say bankruptcy should be your last resort?
I think that the phrase “bankruptcy should be your last resort” was dreamed up by the loss prevention departments at big lenders, because they know that if people file for bankruptcy, then they will get lower profits.
In other words, the phrase “bankruptcy should be your last resort” is an attempt to get you to take actions that aren’t in your best interests.
It just isn’t true.
What happens in reality?
In reality, bankruptcy should be your first resort.
Most of my clients file for bankruptcy because something bad happened to them financially.
- Were laid off for some time
- Had a trip to the hospital
- Went through a divorce
- Lost some hours at work
- Have a house with a mortgage balance that is much higher than the value of a house
- Have a long term medical condition meaning they can’t work or need expensive medication
Why do people put off filing for bankruptcy?
Many of my clients have tried for years to keep paying debts that they took out when times were better.
People often get money from family to help, or they take money from their retirement accounts to avoid filing for bankruptcy.
But eventually they have to file for bankruptcy anyhow because the debt and interest payments are just too high.
What would have happened if they had filed for bankruptcy sooner?
My clients say that if they had filed for Chapter 7 bankruptcy or Chapter 13 bankruptcy first, then they wouldn’t have had to borrow from family members or cash in their retirement accounts. By thinking that “bankruptcy should be your last resort” you are very likely to be harming your family and your financial future.
One of the most common things my clients say after filing bankruptcy is that they wish they had done it sooner. When the case is over they find that the stress goes away and they can start rebuilding their financial future.
Why should bankruptcy be your last resort?
If your life changes in a way that you can no longer afford to pay debts, you should file for bankruptcy right away; it should be your first resort.
WHAT TO DO NEXT
If you’re struggling financially and know that bankruptcy could help but think that bankruptcy should be your last resort, then why not not speak to us now at 612.824.4357?
We’ll give you all the help and advice you need.
We’re looking forward to helping you.
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