Question: I Can't Pay My Bills. What Can I Do?
Dear Steve,
I'm so completely freaked out about my bills. I'm now so in debt and worried about it I can't sleep, I'm depressed, and all my wife and I do is fight about money.
I'm constantly telling my kids they can't participate in any school events because I can't afford it.
My life is hopeless.
Jimmy
Answer:
Dear Jimmy,
It is very common for people to allow money troubles to ruin their lives. In a survey I conducted years ago, nine out of ten debtors felt some stress over their debts and 70 percent said they think about their debts often.
Being worried to the point of finding yourself very depressed over the situation is a common occurrence for four out of ten debtors. The reality is we create our own negative emotions surrounding our money problems.
In all of my decades of helping people with financial advice I've run into very few people who didn't wind up in deep trouble because of forces outside of their control. Take the bankrupt farmer whose crop didn't come in because of an unexpected drought. Does the lack of rain make him reckless?
As individuals we worry so much about what other people are going to think of us for having debt problems. The reality is the majority of people don't think about you that much.
Frankly, the biggest mistake I see people making is not considering bankruptcy early enough to exercise their legal right to get a fresh financial start. Recent data out from the Federal Reserve Bank of New York shows those who decide to file bankruptcy find their credit rebuilt and their credit score significantly rebound much faster than those that linger in problem debt for years. People are shocked to learn that they will begin getting offers of credit following their bankruptcy.
Even more importantly, these days I worry more about people who take five to struggle and limp by trying to dig out of a bad financial spot because they feel their first commitment is to their creditors. They completely overlook their commitment to their future retired selves.
Money saved today in a qualified retirement plan can grow tax-free and be worth hundreds of thousands of dollars in retirement. Money that you will need when you are no longer able to earn money and you are old and unable to work. And let's not forget if your employer matches the money you save you are throwing away free retirement money by not saving your contribution.
So while you might feel guilty about your current situation because you are living through it right now, how will you feel when you are 82 and struggling to get by depending on a fragile Social Security system to keep you warm and dry? More than four out of ten people admit they have no money saved for retirement. Do you want to be one of them?
If we are talking about responsibility here, who do you have a greater responsibility to serve; your creditors or your old future self?
Bankruptcy allows people to rearrange their finances to fit within their income. That adjustment can allow you to get back to retirement savings. What people always seem to overlook is that there is nothing that prevents people from repaying their creditors if they want, following bankruptcy.
Rather than find yourself stuck in regret and hopelessness, you owe it to yourself and those you love to talk to a local bankruptcy attorney and find out what bankruptcy would mean for you.
Dealing with the problem debt will allow you to close the door on the problem situation and help you to move forward in a constructive and hopeful way.
I find it so ironic that companies file for bankruptcy protection and their stock increases. Investors view bankruptcy as a logical and proactive step to reorganize a bad financial situation; yet individuals think it is wrong, against their religion, or immoral. In fact, you might be very interested in what the Bible actually says about bankruptcy.
Don't believe everything you assume about bankruptcy. In fact, between 2006 and 2011 nearly 500 churches and faith-based groups filed bankruptcy. And currently there are about 90 more filing for legal financial protection each year.
Before I go I wanted to leave you with three easy action items you jump on right now to address your situation. Just click here.
Steve Rhode is the Get Out of Debt Guy. He's been helping people with personal finance troubles through advice and education since 1994. If you would like to ask a question you can visit https://GetOutOfDebt.org/ask and let Steve help you for free.
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