BY MICHAEL A. CIBIK, ESQ., American Bankruptcy Board Certified/ Question: Why bankruptcy can’t fix everything.
Answer: In society today, we want a quick fix for everything. A little overweight, take a pill and lose weight. Feeling a little blue; take a pill and things will look brighter. We are used to stock answers to questions and become a bit upset when there is no easy answer to a particular problem.
Your finances are no different. Often, you find yourself in a situation needing some assistance as the result of several different factors. And often, there is no one fix to alleviate the financial difficulties.
For example, recently I spoke with a person who was going through a divorce. As a result of the separation and impending divorce, a two-income household went to a one-income household. This person had a substantial amount of unsecured debt but, with a one-household income, keeping their home was going to be problematic. This person thought bankruptcy would provide the answer.
Unfortunately, bankruptcy will not fix everything. While a bankruptcy filing would certainly get rid of the unsecured debt, it would not do anything to help make this person’s mortgage more affordable. It would not do anything to bring more income into the household. It would help by eliminating some potential outflow of cash but the unsecured creditors were not being paid anyway. As this person pointed out, “getting rid of the credit cards isn’t helping me because I’m not paying them now.”
There are many things going on with this person’s life. Bankruptcy cannot mend a broken marriage even though financial issues are often cited as a cause of divorce. Bankruptcy cannot bring more money into a household if there is already a shortage of funds for certain expenses (assuming that you are already not paying unsecured creditors to pay more important things like food, shelter and transportation). Bankruptcy cannot make an ex-spouse “do the right thing.”
In short, bankruptcy cannot fix everything.
Next Week’s Question: What are five more silly reasons not to file for bankruptcy?