There’s a huge debate about whether someone deeply in debt should declare bankruptcy.  

Some credit advisors say it is better to work two jobs until the debt is paid.  Some advice (usually from credit counselors supported by the credit card industry) says that declaring bankruptcy will ruin your credit, and your life, for ten long years.  (So will registering with a credit counseling company, but they don’t tell you that part!)

Everywhere you find credit counselors telling you NOT to declare bankruptcy.  Look what would happen if you did that:  You would hire a lawyer; you would file your paperwork with the court, you would have a reorganization plan put together for you by the court, or have all your debt discharged, and you would NOT NEED CREDIT COUNSELING AGENCIES.  You would no longer be paying them fees month after month, nor would they be able to collect a percentage of the debt they get cancelled!  So they have a personal, vested interest in getting you to avoid bankruptcy.  Similarly, the so-called non-profit agencies who do not charge you a fee must be getting their money from somewhere – and they are – from the credit card companies.  You can expect they won’t tell you to file bankruptcy either – they will insist you try to repay your debt, no matter how long it takes and even though that too will ruin your credit for years. 

Let’s look at the facts:  The vast majority of bankruptcies are NOT people scamming the system, but Americans facing serious financial trouble – loss of a job, divorce or major illness without insurance to cover the cost.  Many Americans are living one or two paychecks away from financial disaster.  So when disaster strikes, they can barely put food on the table or afford to look for work, let alone repay credit cards. 

In addition, many people feel there is a stigma with declaring bankruptcy, that you are a failure, a cheat, a deadbeat.  Let’s get rid of that stigma right now.  In the business world, bankruptcy is called “bankruptcy protection”, not failure or cheating.  Business gets “protected” from it’s creditors – other businesses it owes money to!  How many times has Donald Trump declared bankruptcy?  If it weren’t for bankruptcy protection, he wouldn’t be the rich man he is today!  

Bankruptcy is there precisely to help American who find themselves in a hole too deep to dig out of.  It is in fact “protection” for you too.

There is no shame in bankruptcy.  It helps people regain their footing.  It helps your family keep your home where you are needed, and start over with money in the bank.  When you are in financial crisis, the laws of the United States have given you a second chance.  They are there to HELP you.  

If you are so deeply in debt that there is no way to pay all of your bills, for example you owe more than one and a half times your annual salary in debt, then getting a second job may not be an answer either, since you’d have to work two full time jobs to dig out.  Given that if you are in this financial situation, the stress of this on your family may be too much for you to handle.  If you are desperate for funds and then have to take yourself away from your family for even more time, or spend extra money putting your children into child care, then the burden of working more many be even worse that bankruptcy!

Bankruptcy will stay on your record a long time, but so will your bad credit repayment history.  Bankruptcy can also mean relief right now, from constant creditor calls, from worry, and give you a chance to get a fresh start.  Don’t write it off as an option, but consider it thoroughly and seriously with all the other debt reduction methods you are considering to get your financial life back on track.