First Step to Get Out of Debt - Don't Use Bankruptcy as a Last Resort

Posted by Wesley Scott on September 24, 2013 at 11:02 AM
Wesley Scott

If you are in debt and looking for a way to get out, consider ALL of your options. When all of your options are on the table, take time to think through the advantages and disadvantages of each and how they will affect your life in the long run. Sit down with a legal professional, too, to discuss your options and get advice and opinions about which is best for your specific situation. 

Many debtors approach debt with the mindset that they are going to do everything in their power to try and manage their debts and make payments before filing for bankruptcy, which is synonymous with hitting rock bottom in their minds. This is one of the biggest mistakes you can make. Don’t rule out bankruptcy and don’t leave it as a last resort – doing so can have a significant impact on your mental, physical and financial health.

Debt-Induced Stress

Get Out of DebtDebt causes an unbelievable amount of stress – on individuals, on relationships and on activity performance. Many debtors with an overwhelming amount of financial strain get caught up in these issues and are unable to focus on anything else. Additionally, if the debt is split within a relationship, the blame game gets played (because it is easier to blame another than accept responsibility). And, if your mind is wrapped around your debt, your other activities – work, socialization, play, etc. – will suffer because you aren’t fully focused on these less important tasks.

Stress not only affects these aspects of your life, it can have serious health consequences. According to the Mayo Clinic, stress can affect your body, your mood and your behavior. Here are those effects according to the Mayo Clinic:

  • The effects of stress on your body:
    • Headaches
    • Muscles tension or pain
    • Chest pain
    • Fatigue
    • Change in sex drive
    • Upset stomach
    • Sleeping problems
  • The effects of stress on your mood:
    • Anxiety
    • Restlessness
    • Lack of motivation/focus
    • Irritability or anger
    • Sadness or depression
  • The effects of stress on your behavior:
    • Overeating or undereating
    • Angry outbursts
    • Drug or alcohol abuse
    • Social withdrawal

The cycle then continues, because these stress related health effects can affect your lifestyle, relationships and activities.

Remain Stuck or Fall Further Behind

With the “bankruptcy is a last resort” mindset you run the risk of remaining stuck in your current financial distress. Debt consolidation programs often extend your repayment timeline without offering much relief in terms of interest rate reduction, lowered monthly payments and continual stress. Bankruptcy offers the benefit of “turning over a new leaf,” through debt elimination and manageable monthly payments.

If you don’t remain stuck, you may fall further into debt. Many debtors mistakenly turn to their savings, a 401k for example, to pay off their debts. This is a huge mistake! These accounts are protected in bankruptcy – don’t throw your retirement away by approaching debt with this mindset. Another common scenario is debtors using their money to pay some bills, but not others, which causes them to fall further into debt.

Some overwhelming debt situations are more manageable within bankruptcy and can lead to a fresh start much quicker than other debt options. Each debt situation is unique, and a legal professional can offer insight and make recommendations based on your situation.

 

It’s not that bankruptcy is always the answer, but approaching your debt as though bankruptcy is a last resort can be detrimental to your health and the speed and ability with which you can become debt free. Talk to a legal professional about your financial situation before making any final decisions about dealing with your debt.

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Topics: Bankruptcy