Lenora wrote to me and asked:

Dear Get Out of Debt Squirrel,

What should I do about my debts? I am trying to set up a budget, but even with a budget, I can’t make all my payments. I need help now? I have over $23,000 in credit card bills and I want to get free of all of them. My husband thinks bankruptcy is the answer. But I am not sure God wants one to do that. Help!!!!!!!

My Dear Lenora,

While it feels like the walls are closing in on you and that you are living through desperate times, rest assured there is a way through this mess.

It doesn’t really matter what the number is that you owe. What is important is that there is not enough money coming in to take care of the bills.

As you say, even if you take your expenses down to the bare minimum, you still can’t make it from month to month. That is a clear indication that no amount of catching rain water to flush toilets, washing out Ziploc bags or reusing aluminum foil is going to do the trick.

Your husband has mentioned that maybe you should go bankrupt, and maybe you should. After all it is a legal and valid solution for dealing with overwhelming debt.

You mentioned what would God want you to do and I think it would be a mistake to automatically discount bankruptcy as an option simply because of what you think God might want for you. Think about it, she led you here for a reason and maybe that reason was to read this answer and to talk about bankruptcy?

Your options really come down to a few basic choices:

1. Do Nothing.
2. Increase Income and/or Reduce Expenses.
3. Go Bankrupt
4. Enter a Reduced Payment Plan.

Lenora, it’s not rocket science, just tough, difficult, emotional and gut wrenching. As a furry squirrel sitting on a distant branch the path you should take seems clear. Here is my plan for you.

Lenora’s Plan of Action to Get Out of Debt

1. First thing I would suggest if you need immediate relief from debt collectors or collection calls and you are not yet ready to go bankrupt is to enter a reduced Payment Plan where you can consolidate your debts.
2. I would also suggest that either now or as soon as you are ready you should talk to a bankruptcy lawyer. This doesn’t have to be with the intention of going bankrupt but to educate yourself about the realities of what bankruptcy means to you and your husband.
3. At some point following the meeting with the bankruptcy lawyer or during the early months of your consolidated debt plan you may decide that you can’t continue to make payments and live in the stress and pressure that you are currently in. You might opt for bankruptcy.

The advantages of this approach are that this does not force you to go bankrupt now if you are not mentally ready for it. And it allows you to make a good faith effort to repay your debt based on what you can afford to pay with professional help in the meantime.

Only you can decide if bankruptcy is right or wrong for you. But I ask you to consider this as you say your evening prayers. Lenora, do you have a greater responsibility to fix the past or attempt to fix the future? If you want to fix the future then it just might make more sense to go bankrupt now, get yourself back into a safe position where you can afford to live, and then if you have extra money leftover, you can always repay your creditor for moral reasons.

Going bankrupt does not mean you can’t still honor your debts. It just gives you legal protection and a fresh start, or you can keep living in the past. The choice is yours.

From a squirrel point of view I always prefer to hunt for as many nuts as I can and save them for the winter to come rather than worry about how many I didn’t have last year.

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