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The Truth About Bankruptcy
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No one wants to think about bankruptcy as his or her only option, but if it’s even on the table you owe it to yourself to take an honest and pragmatic look at your situation.
The worst thing you can do is put off a bankruptcy that, in the end, was inevitable. “As soon as someone realizes they can’t pay their debts, they need to act,” says Sarah Litchney, CEO of the Litchney Law Firm, which specializes in bankruptcy filings. “The clients with the best outcomes are those who act while they’re still current on their payments, but realize they can’t stay current much longer.”
Acting quickly can also save some of your assets (including your house depending on how you file) and avoid lawsuits and liens that could garnish future wages for years. Importantly, the alternative – paying off debt with your 401K or other retirement savings, and selling anything that’s not nailed down – only serves to needlessly deprive you of those assets.
Certainly there’s something of a stigma associated with bankruptcy, which is why those in the industry prefer to call it a “fresh start.” It’s a way to put the bad behind you and get out from the stress of mounting bills. “It’s not ultimate ruin by any means,” Litchney says. There are downsides of course, among them a public record on your credit report for seven years.
