Bankruptcy isn’t the easy way out
While the prospect of eliminating all of your debt can be very appealing, bankruptcy isn’t the “easy way out.” I am not talking about the change in eligibility rules making it more difficult to qualify for liquidation under Chapter 7 personal bankruptcy. I mean the process isn’t easy and it isn’t easy on you.
When I took over my father’s failing business it wasn’t because I thought it was a good idea. It was because he couldn’t/wouldn’t run it any more, but he also wasn’t willing to go through the corporate bankruptcy knowing personal bankruptcy would soon follow since he had personally guaranteed the corporate creditors. He knew enough about it to know it wasn’t something he would be able to tolerate.
There was a time when bankruptcy carried a moral stigma, and maybe dad was from that era, but dealing with failure is hard. Bankruptcy is admission of failure – to you, and to the world, since the bankruptcy proceedings become public documents. The stigma has been lessened in recent years by the sheer numbers of people who go through it, but it still isn’t easy.
In my case, we had turned the business around. After four years of operations with decreased losses followed by small but steadily increasing profits, we didn’t have a war chest of funds built up, but we were heading in the right direction. In the process, all of the old personal guarantees had been updated to me, instead of dad. Then, when a set of new problems came up quickly, we didn’t have the capital to weather the storm, and the company ended rather quickly. It took a while for the company liquidation bankruptcy, and then the guaranteed creditors looked to me.
I had put “everything” into the company, and lost my job when we closed the company. I knew I couldn’t pay the corporation’s debt, but it still wasn’t easy to file the personal bankruptcy. Gathering the lists of assets, liabilities, and creditors was tedious. I found even the brief discussion with folks who call for collections (explaining that you have filed and giving them the case number shuts down their calls) to be traumatic. It gets back to dealing with failure is hard.
I had a good bankruptcy attorney, and she gave me the information I needed to make decisions at each step. She made it as painless as she could. It’s just still hard. And lasting for months doesn’t seem all that quick when you are going through it. It is certainly worth exploring all of the alternatives before choosing bankruptcy.
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