Dear Steve,
I live in rural Idaho where the cost of living is very high, and wages are very low. (It 's Sun Valley, ID, if you were wondering.)
I live with my husband and two kids. My husband has a good job with the local school district, but his net income is only $42,000. Despite having a graduate degree, I am working in a restaurant to make ends meet. There are few professional jobs here. The cost of daycare for 2 kids under 5 is more than I can bring in, so I stay home with the kids.
The problem is that, in six years, we haven't been able to dig ourselves out of debt. My student loans are $58,000, and we have 3 credit cards with $50,000 in total. We are just treading water and can't get ahead. I have always had excellent credit, but I am finally ready to swallow my pride and ask for help.
My husband continues to apply for higher paying jobs, and has gone on multiple interviews in the past few years, ( where he has paid out of pocket for flights, lodging and rental car) only to find out that he was the "runner up candidate" in a national search. We can't take the stress and the heartbreak anymore.
I want to file bankruptcy, but I don't know the laws in Idaho and how to proceed without a lawyer. Can you help?
Tamara
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Answer
Dear Tamara,
Thank you so much for reaching out to me for help.
I most certainly understand how difficult the position you are in right now is. I bet you feel like you can never get ahead and there is no way out of the mess you are in.
I don't know what the $50,000 of credit card debt is comprised of but it is what it is. At this point I find most people use this experience as their teachable moment and it alters the way they relate to money moving forward. Bottom line is people can learn from their situations and mistakes. There's no sense wasting a perfectly good mistake I always say.
If the debt was comprised of making ends meet over a long period of time, in the future if this begins to happen again your radar will be up and give you a really early warning. You've had a great lesson in what not to do and I believe you will both learn a lot from the experience.
Most people look at bankruptcy as the moment they sunk to their deepest point. I look at it exactly the opposite now but I admit when I went through it myself in 1990, I felt the same way.
You see bankruptcy isn't the end of your financial life and an irresponsible action for most. It's actually the start of a new and better financial chapter and admitting the reality of your situation is taking responsibility for a safer and better future for you and your children. I think you'd get a lot out of reading "So You Are Going to File Bankruptcy. That's Great News. Congratulations." It covers the major myths and misperceptions people have about bankruptcy.
What I find is there are some people like Dave Ramsey (who filed bankruptcy by the way) and others who say people should never file bankruptcy. They say it is somehow wrong. But I don't think that adds up.
If someone has a set of beliefs and bankruptcy does that match that set of beliefs then for that person bankruptcy would be against their beliefs. For that person it would be wrong in their eyes. I get that.
But if we just look at the situation using logic and math there is almost no position that would demonstrate bankruptcy was not right in an impossible financial dead end. That's why it is a legal right.
These days I'm much more worried about people setting themselves up with a savings account and saving for retirement than I am about them spending the next six years trying to repair the past. Is it better to retire poor or pay the old impossible debt?
Recently I was helping a 35 year old woman. When I did the math if she spent the next ten years repaying her debt it would cost her over a million dollars in her 401(k) that she would not be able to save. Which is better?
Is Social Security going to be there when we retire to protect us? Should we sacrifice retirement saving and hope there is a strong social safety net to save us when we are old and the most vulnerable? What does logic tell you?
Filing bankruptcy should not be a matter of swallowing your pride. I hope that you realize that you are doing what is best for you, your family, and your children. You need to stop thinking like a consumer and start thinking like a corporation. You need to change your mindset.
Just because a decision is hard, does not mean it's not right.
As far as filing bankruptcy yourself, I'm generally against it and here's why. When someone is in problem debt they are usually not looking at things with a clear head. They have no experience filing bankruptcy and a mistake in a bankruptcy filing can have serious implications. It is one of those things in life where I think having an experienced licensed professional helping you just makes good sense.
Here is what one bankruptcy trustee also has to say.
By the way, you can watch the rest of the videos here.
Bankruptcy lawyers are like any profession. Some are exceptional people who are caring, compassionate, and kind. Some are not. But read this to learn what to look for to find a great bankruptcy attorney.
The way most people seem to save up the money right before money is they stop paying their cards. The bankruptcy trustee also alludes to this approach in the video above.
If you did insist on filing bankruptcy yourself, and you qualified for a chapter 7 bankruptcy, the best book I have personally read is this one. But I would no more file my own bankruptcy than I would fill my own cavity.
I think that it makes good sense, even if you ultimately decide to file bankruptcy yourself, to find a local bankruptcy attorney and meet with them. You don't need to go in with the intention of filing. Go in with the intention of finding out what bankruptcy would mean for you. Don't make any decisions that day. You and your husband should go home and let what you learned percolate for a few days and be confident in your decision before you take action.
Then, and only then, will you be in the best and most fully informed position to really know what is right for you.
And one last point for those that feel bankruptcy is wrong or for those that feel they didn't pay what they owed. There is absolutely nothing that prevents anyone from repaying their creditors after bankruptcy if that's a priority to them.
The most important question though is Tamara if you feel you have a greater responsibility to fix your past of your financial future for your family?
In the words of the great Spock, "Live long and prosper."
Big hug.
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