2008/2009 my small business begin to tank. Rather than close it (which I have since done), I froze. I cleaned out my 401K, my Roth, my IRAs – and I eventually got a job. Both my Husband and I both lost our jobs shortly after that and now we are in 2011 with no savings, one income (that tends to be variable), default credit cards with balances, medical debt and a house that we are behind on but are almost caught up on. We are currently not in foreclosure but we are about 1 to 2 month behind. I can catch that up and pay the relatively minor amounts on bills most months. Our bills are about $2500/3000 a month and I can usually get that but until he gets a job we are behind a bit. At this point we have no car payments, just insurance on the cars and utilities, cell phone (as I use it for business quite a bit), internet bill.
We got accepted to Making Home Affordable Plan in 2010 but I lost my job during that time and got behind on a payment or two and they kicked us out. Bank of America is our home mortgage company and have been working with us so far.
My question is – should we just declare bankruptcy and clear the decks on those bills that are years behind at this point. I feel frozen but think that if I got even a small payment plan up I could do some paying back and bankruptcy feels like a huge failure.
I was going to talk to a debt settlement company but most of those are when you have current debt. Ours are in serious default and just sitting there like a stone on our credit.
So we have currently no credit, a bank but still owe Chase some money so we can’t even write checks not that we would.
I’m just not even sure where to start. I don’t have a good sense of what is the best plan.
1. Make a list of all the debts and begin to nibble away at them. I think there are about 25,000-30,000 in default credit and medical bills.
2. Bankruptcy and start over
3. Find an unknown group that can help us restructure and get on a plan to dig out.
Thanks for your approach. Just typing this feels good even if it makes me cry.
Thanks for reaching out to me from ReadyForZero.
While debt restructuring and nibbling away might make possible sense, I don’t see those strategies as applicable in this situation. The reason, you have no emergency fund to fall back on hen a financial emergency happens.
It’s very easy to get caught in a paralyzed position. The pain of the recent past has got you focused on repairing that. But the reality is the bigger danger lies in the opposite direction, in the future.
If I asked you if it was more logical to spend the next five years trying to fix the past or to use that time to build a better future, the logical answer is to focus on the future.
We know what the past brought and it wasn’t fun at all but without bankruptcy how are you going to be able to start saving to cover a financial emergency or how about saving for your retirement? They are real concerns if social security is going to be available when we get old. And even if it is, will it be enough to get by on?
Do you want to risk having to live on dog food later by spending more time and resources dealing with the past now?
Before you make any decision, do me a personal favor, find a local bankruptcy attorney and go talk to them. Describe your situation to them and digest the feedback they give you. I think you will probably find it makes sense and will give you a legal fresh start that makes tomorrow a new day to do better.
You can click here to find a local bankruptcy attorney and if you’d like a second opinion about your situation or a personal consultation by another debt coach, please feel free to contact
And while you may perceive bankruptcy as a failure I think you should read this, “The Honest and Unvarnished Truth About How to Get Out of Debt.”
Please post your responses and follow-up messages to me on this in the comments section below.