By: Jeena Cho

One of the most frequent questions people ask me at the consultation is “do you think I should file for bankruptcy?” Of course, being a lawyer, I can’t ever give a simple “yes” or “no” answer (this is taught first day in law school). My answer is usually “if you don’t file for bankruptcy, what other options are there?” I think the question isn’t “should I file” but really “can I afford not to?”

Just last week, I met with a client who had 4 lawsuits against her. She came in for debt settlement advice. She was adamant about not filing for bankruptcy. When I asked her how much money she had in the bank account, she answered “few hundred dollars.” She also had no other source of funds to tap into. From where I was sitting, she was simply delaying the inevitable and avoiding the necessary. There was barely enough money for her and her son, never mind any of the credit card debt. She certainly could not afford to lose 25% of her paycheck to wage garnishment.

At 50, she had not saved a dime towards retirement, or any money for her son’s college education. She had spent the last 5 years making monthly minimum credit card payments of $500 (which has now increased to $1,200). Barring some miracle such as winning the lotto, I did not see how she was ever going to pay off her $100k in credit card debt. Still, she resisted.

Don’t get me wrong. Bankruptcy is a big decision and it should be the last resort. However, it’s one thing to have an exit strategy where you are working towards being debt free vs. living in denial knowing there is no exit strategy. If at the end of the day, you have no exit strategy, and bankruptcy is inevitable, there are definite do’s and dont’s you need to be aware of.

My #1 advice to anyone struggling with overwhelming debt is to assess your situation now. Ask yourself:

• If I continue my current path, can I get out of debt?
• What will it take for me to get out of debt?
• How long am I willing to struggle with my debt?
• What is my 3 year plan? My 5 year plan? What will it take to get there?

You may want to consult with a financial advisor to assess your financial situation.

If you want to discuss the possibility of bankruptcy, call us. (415) 963-4004. Read more about our first meeting here.