At Kain & Scott, our MN Bankruptcy Lawyers have been filing bankruptcies in Minnesota since 1972. In that time, we have filed many thousands of bankruptcy cases. After a while, you can see patterns that Minnesotans go through before they file for bankruptcy protection. It’s almost like clock work really. So, if you see yourself doing one of the five common things people do before they file bankruptcy in Minnesota, you should ask yourself, is this me too?
It doesn’t matter your vocation, race, whether you live near Minneapolis, St Cloud or Brainerd MN, all of the debtors we have seen develop a pattern of similar activity before they file for bankruptcy protection. We put these patterns together in this blog so you can see if your activity is an indicator you should be considering a bankruptcy too.
Funny thing is- we have never heard of a client regretting to file bankruptcy, but we hear all of the time about clients who wished they would not have waited so long before they filed bankruptcy. You read that correctly. Once you get over the stigma of the “b” word, and move beyond that, clients who have filed a bankruptcy and got their lives back only regretted waiting so long before they filed the bankruptcy.
The reasons they regret waiting so long are the same reasons you will see below that are indicators you should be thinking about filing a bankruptcy too.
1) YOU CAN’T STOP THINKING ABOUT YOUR DEBT AND THE STRESS IT CAUSES YOU.
Ask yourself honestly- do you obsess about the level of your debt? I can’t tell you how many times I hear people tell me about laying awake at night worrying about their debt. They pace the floors at night wondering how they are going to juggle the bills and keep everyone happy. Having the phone ring from bill collectors is the last thing they want to deal with.If you find yourself obsessing about your debt and it will not go away, you need to be thinking about whether filing a bankruptcy is right for you and your family. When mom and dad cannot stop thinking about their debt problems, you know your children and others around you can pick up on the cues. Stop torturing your family and friends and do so something about it!
For me, I don’t mind the problems most often, but what I really care about is what are the solutions to those problems. Constantly thinking about overwhelming debt problems without thinking about solutions to those problems is pure madness.
2) OBSESSING ABOUT DEBT HAS CAUSED PHYSICAL AND MENTAL HEALTH PROBLEMS.
So, you lay awake at night worrying about debt. You think about it non-stop and you want to avoid the “b” word because you don’t want to give up right?
As I have shared so many times in my blogs, I have high anxiety. I don’t necessarily have an issue having problems, but I know that I can’t have problems linger without solutions before it really starts to affect my mental health. Aren’t we all that way? Can anyone go a long time with an overwhelming debt problem but no solutions to it?
Oh, I suppose if you are low anxiety type of person and you don’t mind dodging land mines and hearing the bullets whiz by you ears, but those kind of people, while they humor me a great deal, are few and far between. The reality is most people do not like this kind of stress.
I have heard people time and time again tell me about their ulcers, anxiety, hives, or any number of physical and mental ailments that result from the stress of having overwhelming debt. The reality is this stress is not good for our physical or mental health and never will be.
Sadly, we have even had people over the years, take their own lives- all on the account of overwhelming debt. How sad it is that a problem like overwhelming debt can provoke such a solution to the problem when other solutions do exist to permanently solve the problem for good.
Say you go to the doctor with an infection in an embarrassing place. Trust me when I tell you the doctors or nurses do not care about the infection or where it is at. They just need to diagnose the problem and give you the medicine you need to resolve the problem. Now, the medicine may taste awful and you may be embarrassed, but you know if you deal with it and take the medicine the problem will go away.
So it is with a debt problem. We don’t find debt interesting, it’s just something to resolve. Big deal! If you are obsessing about debt and it is causing you mental and physical health problems, you need to think about whether filing a bankruptcy makes sense for you.
3) BORROWING FROM PETER TO PAY PAUL
Have you ever taken one credit card to pay another credit card and then used the first card to buy groceries or pay your bills? If so, you are borrowing from Peter to pay Paul. If you are borrowing money from a relative or friend to pay another bill, and now you owe your family member or friend money, you are borrowing from Peter to pay Paul.
This continuous cycle of using one credit platform to pay another creditor is a vicious cycle that never really ends does it? This juggling act comes to a complete crash when all avenues of obtaining credit freeze up and there is no where else to turn. Then what?
Then you either have to see if you can obtain new lines of credit or new loans from a bank, a relative, or anyone, or it’s game over.
Does this three ring circus sound familiar to anyone here? How stressful is it to keep this juggling act performance up so none of the balls hit the floor? Very stressful indeed. You can sense the desperation in the person asking you for money and you refuse. You feel terrible for the situation they are in and you can sense the desperation in their voice and their demeanor.
If you are Borrowing from Peter to pay Paul, you should think about whether a bankruptcy might make sense for you. Many of our clients before you, did exactly this only to file a bankruptcy in the end anyway. They could have saved their friends and family members and themselves a lot of anguish by simply addressing the debt problem head on with an experienced bankruptcy attorney.
4) GOOD BYE SAVINGS, RETIREMENT, AND HOME EQUITY
I have seen this so many times, it actually makes me stressed out. The debt has piled up and there is only one thing to do- grab any other asset and throw it at the debt. Say, for example, you have 50k in credit card debt and you just lost your job and you go on employment. You were a high wage earner and the 500.00 in unemployment is just not going to cut it.
Human nature is a funny thing. We all have so much damn pride and thought of asking for help just kills us, right? So, you do what most of us would do- you begin to eye ball assets to sell, liquidate, or refinance.
How many times have I seen the 401k pension liquidated to pay debt only to end up owing massive taxes, and still more debt accrued because when you paid the card down or off you needed to use the card to continue to pay living expenses. Why? Because you were at the company for 20 years, and you had been making really good money. The unemployment payments you get are peanuts compared to what you made, and you have been unemployed a lot longer than you thought.
When you did get a new job, the pay was 60% of what you made before and you had to continue to make payments on the home you purchased when you made a lot of money. So, the credit card balances are back up there again.
This time, the 401k is already gone, you owe huge tax liabilities, you refinanced the house and the equity is gone and now you have a new mortgage payment, and any asset you could sell, like boats, campers, and everything else you sold for pennies on the dollar. You sold the assets for far less than what you thought they were worth- which makes you sick to even think about.
With all avenues of credit gone, and the assets are gone, and you cannot make the payments on the new credit card debt, you turn to bankruptcy.
You have no idea how many times I wished, and so did they, the client came to me in the beginning- before they had liquidated pension plans we could have protected in a bankruptcy, before they refinanced homes whose equity we could have protected, and who sold off all their assets, much we could have protected in a bankruptcy, so the client would not be left with anything.
BEFORE you liquidate pension plans, refinance homes, or sell off assets, meet with an experienced and nice bankruptcy attorney in Minnesota. You will be glad you did.
5) SORRY- TRADITIONAL DEBT CONSOLIDATION IS A WASTE OF TIME!
If you are looking at doing any form of debt consolidation you should be at least thinking about what a bankruptcy could do for you. I feel bad for Minnesotans who come into our office and tell us they tried debt consolidation and it did not work. Why doesn’t it work?
Most debt consolidation companies know you would prefer to avoid discussing the “b” word. In fact, many debt consolidation companies actively tell you don’t file bankruptcy. They feed on your fears and your desire to avoid the “b” word.
The problem with traditional debt consolidation plans is creditors are not bound to it. If they don’t like your payment to them, they will bypass the debt consolidation plan and just garnish your wages where they figure, and often they are right, they can get a bigger payment from you. Truth be told, if someone offered you $200.00 a month for a payment but you knew you could garnish their wages and take, say $600.00 a month, what are you going to do? Exactly, we would all take the higher amount. You can’t really blame them if you are honest about it.
There are other issues with traditional debt consolidation plans too. You typically will pay the debt in full and any debt forgiven, is taxable to you so now you have a tax problem.
The other issue is this- when compared with a chapter 13 bankruptcy, which is a government sponsored debt consolidation plan, traditional debt consolidation plans lose- always. Why? Because in a chapter 13 plan creditors are bound by your plan, you typically do not pay everyone in full, and any debt forgiven is not taxable to you assuming you get a discharge.
Why would anyone do traditional debt consolidation when you could pay ten cents on the dollar to your creditors, tax free, and protected from your creditors in the plan? We wonder ourselves.
If you are thinking about traditional debt consolidation, you should be considering whether bankruptcy is right for you. As with all of the markers above, debt consolidation is a sign of financial distress. When you are facing financial distress, bankruptcy is always on the table, as a tool or medicine that can be used to solve an overwhelming debt problem.
Don’t be one of our former clients that regretted waiting so long to file the bankruptcy to begin with. If you are stressed, and obsessing about debt, or borrowing from Peter to Pay Paul, liquidating assets we can protect in a bankruptcy, or wasting your time with debt consolidation, you should be thinking about whether filing a bankruptcy for you makes sense for you and your family.
For further information contact one of our Bankruptcy Lawyers MN today for a FREE, no-obligation Bankruptcy Consultation today!
Brainerd Bankruptcy Attorneys MN - 218-822-3300
Eagan Bankruptcy Attorneys MN – 612-843-0525
Eden Prairie Bankruptcy Attorneys MN - 612-843-0524
Maple Grove Bankruptcy Attorneys MN - 612-843-0529
Minneapolis Bankruptcy Attorneys MN- 612-843-0527
Roseville Bankruptcy Attorneys MN - 612-843-0523
St Cloud Bankruptcy Attorneys MN - 320-252-0330
Woodbury Bankruptcy Attorneys MN - 612-843-0526
