by Guest Blogger on 2009-04-20 20
How we sidestepped bankruptcy. I talk about my near bankruptcy experience.
Why do people go bankrupt? The avalanche can begin any number of ways. A few missed days at work. An unexpected medical bill. A sick child. Or maybe it all happens at once: your car blows up, your interest rate adjusts, your job gets outsourced. Then you start missing credit card payments. For some others, they are unluckier — having to deal with an unfaithful spouse, or a spouse who keeps financial secrets. Whether started by a single, small, seemingly insignificant snowflake or a stick of dynamite, every avalanche looks exactly the same when it’s headed your way.
My Near Bankruptcy Experience
For me and my spouse, life was going well — we paid our credit card minimum payments on time, until my first pregnancy. We were overjoyed when we learned the news and made the plan to get our finances in order so that we could live on one income.
Life, however, had different plans. While still in my first trimester, I began to experience complications with my condition, so I had to prematurely leave my stressful call center job. In the course of a few weeks, our income was cut in half — with only more bills to anticipate in the near future.
Our financial picture was NOT pretty. At that point, we took a good hard look at our financial situation. We had purchased our first home two years earlier (with no down payment and a fixed APR) and
still had over $60,000 owed on it. Only four months earlier, we bought and financed a year-old car. We still had $26,000 left on student loans, and (gasp) over $20,000 in debt over six credit cards and lines of credit. Doing the math, we found out we had debts in excess of $115,000 including the house, and a negative net worth of nearly $50,000! Our household income was $34,000.
Of course, it didn’t take long for the credit card companies to call. And call. And call. We started avoiding the phone calls; we found that the representatives were consistently rude, inconsiderate of our situation, and difficult to communicate with.
Beware Of Those Bankruptcy Attorneys
So we turned to a bankruptcy attorney. Ours was kind, considerate and a great listener who explained our options to us. But of course, he suggested bankruptcy as our way out of our financial mess. But after doing a bit of research, we discovered a disturbing trend. All of the attorneys and organizations that were trying to “sell” bankruptcy as a solution, painted it in positive, “happy” terms: we get a clean slate, a fresh start, a second chance; and it’s simply a way to make the harassment stop. Other sources we found strongly suggested we do a deep analysis of our situation.
5 Steps We Took To Avoid Bankruptcy and To Reach Solvency
Here are the steps we took to sidestep bankruptcy. And no, you don’t have to go bankrupt!
1. Find out if bankruptcy is worth it.
2. We set up a strict budget.