From Newsweek online:
“In January, we’re supposed to sit down and organize our personal finances. This year I’ll risk my good-girl reputation with a subversive idea: go bankrupt in 2009. If you’re reaching the end of your rope, don’t try to hold on. Save what you can.
It’s painful and humiliating even to consider bankruptcy, let alone join that crowd in the courthouse corridor, waiting for your name to be called. Normally I’d say suck it up, cut spending and repay your consumer debt. But that’s not always possible, especially with an economic tsunami rolling over your home, job and health insurance.
Most families, honorable to the end, struggle longer than they should, says Katie Porter a law professor at the University of Iowa. By the time they give in, they’ve lost assets they could have used to start over again. That defeats the point of bankruptcy—to stop the self-blame and hopelessness that goes with bad luck and bad bills, and give yourself a second chance.
The right time to go bankrupt is when you’re financially stuck but still have assets to protect. You can use Chapter 7, the most popular type, only once in eight years, so draw upa ‘no kidding’ plan for living on your income when you’re finally clear. ‘If you’re out of work, try not to go bankrupt until you have a new job and can see what’s ahead of you,’ says Harvard Law School professor Elizabeth Warren.
It’s a mistake to tap your retirement accounts to make minimum payments on monstrous bills. IRAs and 401(k)s are largely protected in bankruptcy, as is most of your child’s 529 college-savings account. This money is your future. Leave it alone and use credit cards for your necessities. Card issuers know that some of their customers will fail. That’s why they charge elephant fees.
Your health is your future, too. You’re doing your family no favors by forgoing medical treatment because you can’t pay. Bankruptcy eliminates medical as well as consumer debt…”
The article goes on to cite a California bankruptcy attorney, stating that “you can file for Chapter 7 bankruptcy, wipe out your consumer debts and still keep your home, provided that your mortgage payments are up to date.” For the above reasons, along with many other related reasons, Orange County residents should be aware of the advantage of filing for bankruptcy for those struggling with their finances. This is especially true for those who wish to keep their homes or other assets, as the article points out. Orange County is especially well suited to receive this advice, as residents from Irvine to Santa Ana to Laguna Woods find themselves with assets to protect but too many bills to pay.
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