Q: My business has hit bottom and I don't see any way out.
I'm $20,000 in debt and afraid of losing my house and what little bit of money I
have left. I've been told that bankruptcy can give me a clean start. Should I
file?
A: Twenty thousand dollars is probably not worth
filing over when you consider that a bankruptcy can follow you for the rest of
your life. It may only show up on your credit history for seven or 10 years, but
take a look at a credit application. It doesn't ask if you filed bankruptcy in
the last 10 years. It asks, "Have you ever filed for protection under
bankruptcy?" Obviously, the decision to file depends on your personal
situation.
However, in many cases you can resolve the problems with your creditors
without going through the courts. Before you take what may seem like the easy
way out, try to work out a payment plan with your creditors based on you ability
to pay, regardless of how much or how little it is each month. Most creditors
know that if you file bankruptcy they will likely get nothing -- but it they
work with you they may at least get their money (even if it is over a longer
period of time). If you were in debt $200,000 I might be giving different
advice, and I don't mean to suggest that bankruptcy shouldn't be considered. But
for the sake of $20,000 you might be making a big mistake. There are many
accountants, business consultants and attorneys who can help get your creditors
to work with you.
Another source to consider for assistance is the Consumer Credit Counseling
Service. This nonprofit group is listed in your telephone directory. They might
not be able to help your corporation out, but as for your personal debt, they
are very highly thought of and creditors listen to them when they go to bat for
you.
Caution: Avoid professionals who think the best thing about bankruptcy is how
they can fatten their bank accounts with fees from people with financial
problems. Bankruptcy is an absolute last resort and not a quick fix to get rid
of creditors for the sake of a few thousand dollars.