I’m So Afraid of Bankruptcy. – Matt

“Dear Steve,

I have a lot of credit card debt and a home in foreclosure. My credit score is really hurting and so the attorney for the foreclosure advised us to declare bankruptcy. We have two cars and dont know how to handle the cars with regard to bankruptcy. My wife makes no income and I don’t know how she would be allowed to file as all the cards are in her name because she had better credit but I have been paying them with my income from my job.

We would like to keep one car but the payment is $593 a month and according to our loan modification, the attorney said we should look at paying 31% of our gross income towards our mortgage payment which is $1931 a month based on our income of $75,000 combined. I am worried that even without the credit cards which we will hopefully clear through bankruptcy if we can, that our budget is still out of whack but I am afraid with a pending bankruptcy and low credit scores that we will not be permitted to rent a place and we also have three dogs which most renters don’t like.

To add to the problem, I could not get approved for a car loan with my credit so both car loans are also in my wife’s name and I am afraid if we let them both go we will be left without a vehicle.

In consideration of the impending possible bankruptcy, what should our sacred cow(s ) be?
Should we try to keep the house and get rid of both cars? Keep one car and try to do the house with it? Or get rid of everything and be stuck with nothing, which is very scary! Your help is greatly appreciated!


Dear Matt,

stormsI don’t think you should make this a difficult process. Where the stress and conflicts seem to come into play is when we try to emotionally negotiate with the math. Listen to the math and it will tell you what you “need” to know.

I talk about sacred cows in 8 Easy Steps to Eliminate Your Debt Checklist. This is also a great article on how to get things realigned.

Rather than a sad event in your life, this should really be a celebrated event since you are getting the opportunity to reboot your financial life and do better. Just keep this in mind, The Saddest Avoidable Mistake People Make When Getting Out of Debt.

I hear the fear and worry in your words. And I understand the fear of the unknown is a terrible burden. But the reality is that fear does not equal reality.

stop worryingIf you constantly manifest those fears in your head they will inevitably come true. Stop thinking about what could happen and start thinking about what can happen.

If you want to worry about what ifs then add hit by bus, choke on chicken bone, heart attack, space debris falls on me, etc. There is a never ending series of things to worry about.

But here is the reality. If you turn in the high priced cars you might have to get a couple of inexpensive beater cars to drive for a year till you rebuild your credit and take a second shot and getting heavily indebted in car loans. That’s what I had to do. That’s what a lot of people have to do. There are always the buy here – pay here car dealers. Every town has them. Get a couple of cheap cars till you rebuild your credit.

As far as the house goes, it’s never the percentage that an expense is that makes it reasonable or good it’s how it fits in your life. At the end of the day it doesn’t matter how much you spend on each category. The goal is to live within your income, be able to build an emergency fund, save for retirement, and meet your financial obligations. Parcel it up anyway you want.

Will you be able to rent with dogs, yes. But it might take a bit of searching. I have friends that move around the country every few years. They work from home and love to experience new areas. They have four dogs and always find a place to live. You’ll just have to look at private landlords rather than corporate apartment complexes.

Bankruptcy is a legal fresh start and second chance. You will be able to start over and by taking what you learned from this experience you will be able to do better moving forward.

I think all your other possible fears can be addressed with the links below.

Please post your responses and follow-up messages to me on this in the comments section below.


You are not alone. I'm here to help. There is no need to suffer in silence. We can get through this. Tomorrow can be better than today. Don't give up.

Damon Day - Pro Debt Coach

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