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reason

4 Reasons Why I Will Not File For Bankruptcy

By //  by Khaleef Crumbley

Most of the people who I talk to have debt. Debt is one of the major reasons behind this country’s economic growth over the past 40 or 50 years. Many people use credit cards to buy gas, computers, clothing, and a host of other items. On top of that, many people will borrow money to buy furniture, education, cars, and houses at some point in their life. It has pretty much become a way of life in this country, and I am no different.

When counseling clients (or just speaking with friends & acquaintances) about their finances, I will sometimes mention that I am currently paying off over $100,000 in debt. Oftentimes, the topic of bankruptcy will come up. They want to know why someone who doesn’t own a home, or other expensive assets, wouldn’t simply file for bankruptcy and get a “fresh start”.

Why I Will Not File For Bankruptcy

There are four basic reasons that I have for choosing not to file for bankruptcy (for the record, my wife agrees with this decision, but I will just speak of myself in this article)…

Integrity (I Gave My Word)

The main reason why I won’t file for bankruptcy is because of my word. When I signed up for all of those loans, I not only received the money (or line of credit), but I also received an obligation to repay that money according to the terms of the various agreements!

All of those agreements have a few things in common. I asked (sometimes begged) for money, they said ‘yes’ as long as I agreed to pay the money back, I gave them my word by signing a contract, I gladly spent the money, and now I’ve been paying it back every since.

By signing those agreements I put my word and integrity on the line. If I try to get out of those obligations, I will fail to keep my word and end up dishonoring God in the process!

To me, that is the strongest argument against filing for bankruptcy. I knew exactly what I was getting into when I signed those agreements, and I have an obligation to pay them back. It really bothers me when I see people trying to weasel their way out of an arrangement which they not only agreed to, but from which they also greatly benefited! They enjoyed all of the benefits of the arrangement, but when it came time to “pay the piper”, they claim that they should not be held responsible to keep their word! I don’t want to be one of those people if I can help it.

Protection Against Making The Same Mistakes

I have known plenty of people who have either filed for bankruptcy or have taken out debt consolidation loans, and have gone right back to their old habits once their credit cards were cleared. It takes time for most people to change their horrible money habits, and taking the time to pay off debt in a more conventional manner can give one a chance to develop good financial practices.

By not taking the easy way out, I have been forced to develop and revise a budget, look for ways to reduce my expenses, try to develop other streams of income, and set guidelines for evaluating purchases. Had I been given a clean slate directly after feeling the full weight of my debt, I may not have acknowledged and changed my horrible financial habits, which got me into this mess in the first place (most of our debt is from student loans, but we made some bad decisions along the way as well).

This concept not only works with finances, but it also works with our health, and even our ability to learn. Going on a quick, fad diet may help us drop weight pretty quickly, but it is usually harder to maintain the weight loss once you return to a more normal way of life. Likewise, it is much more beneficial to study a subject over time in order to let the foundational topics sink into our thinking, and then build upon that. If we decide to cram a day or two before we need to use the information, it will be much harder to incorporate it into our normal thought process.

So, by forcing myself to take the hard way out, I not only can identify what I did wrong, but I get a chance to develop a system that will benefit my family for decades after we become debt free!

Satisfaction (I Love A Challenge)

As I think about it, I think that even if I wasn’t convinced of my obligation to repay the loans, I would still choose to pay them back. I love a challenge, and having to pay off over $100k in debt is definitely a challenge!

I want the satisfaction of being able to look back over time and seeing the amount of progress that I have made. This is the same reason why I would never have surgery to lose weight (besides the very serious health risks) – I want to get into shape through discipline and making wise choices!

I want to pay off debt by making sacrifices, exercising discipline, making wise choices, and honoring all of my commitments. Since it won’t be easy to pay off this much debt – especially with one income – I feel that it is more of a challenge than if I only owed $10k or so.

To Serve As An Example

I also feel that I can point to my own situation to be an example for others in my situation. I managed to pay off a huge chunk of debt when I was younger (and making a little more than minimum wage), and I can look to that experience to give me confidence that I can do it again.

I want others (especially some of my clients) to see that I was able to overcome a mountain of debt, and avoid filing for bankruptcy to do it, and have them be able to use a small part of my experience as motivation. If I am telling them not to take the easy way out, I want to be able to assure them that it is worth it!

For some reason we humans are better able to take advice from someone if they have been through what we are currently going through. So if I want to convince someone that bankruptcy isn’t the answer, I need to be able to show them that the alternatives work!

Is This The Only “Right” Decision?

Keep in mind that this article is more about expressing my views on the subject, rather than giving a generic, one-size-fits-all piece of financial advice. Every situation is different, but for the most part, bankruptcy is a quick fix with a huge downside.

Of course there are people who are so crippled by their debt, that bankruptcy seems to be the only option to stop them from being homeless. Each case is different, but please be sure to make this decision with a lot of prayer, reflection, and wise counsel.

I plan to take a more detailed look at the subject of bankruptcy, from a biblical point of view in the near future. You may be surprised by how much the bible has to say about this topic, even though the actual word is never used.

Reader Questions

  1. Have you even been in a situation where filing for bankruptcy seemed to be the best solution?
  2. If you refused to file, what was your reason?
  3. Have you ever declared bankruptcy? If so, was it a struggle to make that decision?
  4. Also, how long was it before you recovered financially?

photo courtesy of FreeDigitalPhotos.net

Filed Under: Debt Management, Personal Finance Tagged With: bankruptcy, bankruptcy in the united states, borrow money, buy gas, chapter 7, credit, Credit Cards, debt, decisions, economic growth, file, filing, insolvency law, reason, reasons, title 11, united states code

4 Reasons That People Fail With Their Finances: What I Have Learned As A Credit Counselor

By //  by guest

[The following is a guest post by Kevin, a credit counselor who blogs at DebtEye]

Over the past few years, I’ve met with hundreds of clients face to face who were looking to get out of debt.  They come to me looking for tips & advice on different ways to get out of debt.

As a credit counselor, we must closely examine their financial health before recommending any type of debt relief program.  I usually preface the counseling session with, “How did you get into debt?  What happened?”

After listening to their stories, it’s interesting how you can see a pattern after speaking with hundreds of people in debt.  You would probably think that a lot of them suffered some sort of catastrophic financial hardship such as: losing a job, death in family, or unexpected medical expenses, without an emergency fund.  Think again!

4 Reasons People Fail With Finances: What I Have Learned As A Credit Counselor

After listening to my clients, here are the patterns I started to notice:

Huh?  What does APR mean:  I ask all my clients to bring in a copy of their most recent credit report, or a copy of their latest credit card statement.  When I ask them what their APR is (before I look at their statement), most of them have no clue what I’m talking about.  Everyone who carries credit card balance should ALWAYS know how much in interest their paying every month!  Read the fine prints!

I think I spend $200 in food: If I asked you how much your mortgage was, or even your car payment, chances are that you would be able to tell me right away.  What if I asked you how much you spend on food every month?  Most people don’t keep track of their expenses.  I know it sounds cheesy, but starting a budget worksheet will help you organize your finances.

Your mortgage is how much? : What ever happened to the 31% housing ratio rule?  Do people not follow it anymore?  Over 60% of the clients had their housing ratio 31%+.  It’s no wonder they have no money left over every month!  When you plan to buy a house in the future, do yourself a favor:  Stick with the rule, or be part of the statistics (like one of the many going through a Bank of America foreclosure).

Today, today, today: Most people only care about the present.  They only care about how much money they can save today.  How can I lower my monthly payments this month?  If I borrow money today, I can pay it back tomorrow.  This is a dangerous path to follow.  Stop thinking about today, and start thinking about the future!

I’m sure many of you may be guilty of some of the things I mentioned.  If you’re not in financial distress, consider yourself lucky!  I recommend everyone to really take a close look at your personal finance.  I don’t want to see any of you in my office!

Kevin is a co-founder @ DebtEye where he helps people get out of debt by finding the optimal solution to pay off credit card debt.  He is a certified credit counselor and previously owned a credit counseling company before joining the DebtEye team.

photo by Chris Sharp

Filed Under: Debt Management Tagged With: a credit, certified credit counselor, counselor, credit, credit card, credit card balances, credit counseling, credit counselors, credit history, credit report, credit score, debt, fail, finances, financing, money management international, personal details, Personal Finance, personal finances, reason, united states bankruptcy law

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