Bankruptcy - Why Not?

Today, I thought I would take a look at Bankruptcy. While each state differs slightly, there are some common ground laid down by Federal law, that all states must follow.

Some think it is so easy to file bankruptcy, but as Dave Ramsey points out many times on the air and his website, it is not.

Bankruptcy is a gut-wrenching, life-changing event that causes lifelong damage.

Bankruptcy is not something to take lightly. Very few people who have been through bankruptcy would tell you that it is a painless action, wiping the slate clean, after which you just go off into your new future to start fresh, without a care.

No, that is not what happens. I have been through bankruptcy (in 1991), and it is not something you want to do, or think about.

There are 3 types of Bankruptcy, which fall in to two categories. Only 2 types apply to personal bankruptcy:
Chapter 7
Chapter 7 bankruptcy is when the court appoints a Trustee who may liquidate or sell some things that you own to pay your creditors. Most of your debt will be canceled, but you may choose to pay some creditors, usually to keep a car or home in which the creditor has a lien.

Chapter 13
Chapter 13 bankruptcy is when your debt is reorganized into a single monthly payment. The payment will continue for 36 to 60 months. In no case may a plan provide for payments over a period longer than five years. You do not have to repay all of your debt. You pay only as much as you can afford, but the minimum payment may be affected by property you want to keep. When you complete the payments, debt not paid is discharged.


Chapter 11
Rehabilitation or reorganization, used primarily by business debtors, but sometimes by individuals with substantial debts and assets.

Of course there are others like chapter 9 for municipalities. Chapter 12 for farmers and fishermen and chapter 15 for international cases.

The thing is with proper help most bankruptcy cases can be avoided. Think I am crazy? If you are contemplating bankruptcy, instead of contacting an attorney, why not contact Consumer Credit Counseling, Lutheran Social Services or a quality financial counselor in your area. Better yet, get financial counseling and take Dave Ramsey's Financial Peace University as a supplement to the counseling for your Total Money Makeover (as Dave Ramsey would call it). It may involve painful amputation of stuff you own, but it will be less painful then bankruptcy. If you thoughtfully take the two steps back so you can get on solid ground again instead of looking for quick fix (like bankruptcy), you will win more quickly and easily. Besides, there is no quick fix. You must learn to change your spending habits. I know personally the pain of bankruptcy. I do not want to do it again, I've been there, done that, got the t-shirt, and it is not worth it.


Bankruptcy and Tithing
By the way, there is one more thing to consider and that is one of the big down sides to bankruptcy is that the law forbids tithing and charitable donations. Of course, scripture, which encourages believers to tithe, also discourages such things as bankruptcy anyway.

"This is also why you pay taxes, for the authorities are God's servants, who give their full time to governing. Give everyone what you owe him: If you owe taxes, pay taxes; if revenue, then revenue; if respect, then respect; if honor, then honor.
Let no debt remain outstanding, except the continuing debt to love one another, for he who loves his fellowman has fulfilled the law."
- Romans 13:6-8

In another words, if someone was going 100% with the Bible in their finances, they would both pay off all their debts and tithe. They would would not file bankruptcy. Now, with that said, I have heard Christians who filed bankruptcy, and then paid off the debts that were discharged later on. They did this because they very strongly believed that God wanted us to pay off our debts in full.