Do You Face A Personal Financial Cliff?

Although our nation avoided falling over its financial cliff, at least for now, many folks may be facing their own individual financial cliffs this year.  But unlike a government, regular people don’t have the option to change their laws, print their own money, or ask other countries to buy their debt. Regular people have to cut their spending and try to find more income. This is common sense and this is exactly what almost everyone does and sometimes it works.

But many people cut their spending to the bone and desperately look for more income, and it still isn’t enough to pull them out of the hole. They deplete any life savings they may have had and begin selling assets, even ones that may be precious them. Many people then turn to the lenders of last resort and pay super high interest rates or live off their credit cards in hopes that things will turn around – in other words they dig their holes deeper while trying to get out. Folks lay awake at night not sleeping and their health and relationships suffer more and more. Then some just give up, overwhelmed by it all.

I believe there are three main reasons we see this same cycle repeated over and over.  First, people are just plain scared, they can feel themselves sinking and it’s like there’s nothing left for them to hold onto but straws.  Second, many people have worked hard all their lives find it difficult to believe there’s a situation they can’t work hard enough to get themselves out of the hole.  And third, most people don’t have any idea what their rights are and don’t know who to ask.  It’s like watching the end of Thelma and Louise, except this time the people in the car go over the cliff trying to stomp the brakes and not the gas.

If you ever feel yourself heading toward a financial cliff, there are some things you can do to avoid going over. The first thing is to recognize the cliff for what it is – you have to cut the radio off and take a clear-eyed look through the windshield at your financial situation and the direction you’re heading. To do this you may need to talk about it with someone you trust – a wise friend, an accountant,  a co-worker or someone in your church or synagogue, maybe a lawyer.  If you think about it, there is someone you know who won’t judge you and can give you some outside perspective on what’s happening.

If you are facing that personal financial cliff, it is time to consider all your options, including bankruptcy.

Bankruptcy is not for everyone and we see folks weekly whom we advise to seek other remedies to their financial difficulty.  But, there comes a crisis point where anyone facing financial difficulty should consider bankruptcy and get qualified advice about whether it is an option that can help him or her.  Personal financial crisis can be triggered by job loss, the birth of a child, expenses caring for elderly parents, a medical crisis resulting in high medical bills and time off work, etc.  Sometimes the crisis does not have a single precipitating event, but is the culmination of higher living expenses and lower income and a debt load that cannot be reduced.  Signs that tip the scales toward bankruptcy include:

  • You cannot maintain living expenses and minimum payments on current debts without pulling cash from credit limits or transferring balances.
  • You are delinquent on house or car payments and do not have a plan (with which the creditor has agreed) to catch up.
  • You are being sued by creditors or being garnished, where the creditor is taking money from your paycheck or bank accounts.
  • You have numerous bills from debt collectors for old or past-due bills that you just cannot pay.

Bankruptcy laws can act like that emergency brake, or even an airbag.  They can stop your slide off the cliff or soften your landing. A lot of companies have figured this out, and that’s why we’ve seen so many of them go through bankruptcy and live to fight another day – they figured out how to use the emergency brake before they went over the cliff and hit the ground.  But unlike corporations, many individuals wait longer than they should to even consider bankruptcy. And while they wait, they lose things that could have been saved.  Important assets are lost- like houses and retirement savings. But they lose other things too – like their sleep, their mental and physical health, and their relationships.

But it doesn’t have to happen this way. You don’t have to go over that cliff.  There are valid, legal solutions to help folks shed or restructure debt they have no hope of fully repaying. There is a way to obtain a fresh start and start living a productive life without an overwhelming burden of debt.  Just remember, the emergency brake is there for your safety. You don’t want to use it unless you have too, but it sure beats the alternative.

Tracy Giles and Malissa Giles practice together at the firm of Giles & Lambert, PC , which has been voted one of the Best Bankruptcy Law Firms by the US News and World Report for three years in a row.  You may reach either of them at 981-9000 or [email protected] or [email protected].

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