When You Can’t Afford to File Bankruptcy
By Paula Langguth Ryan
I got several more frustrated calls this week from people who believe bankruptcy is their best option. The problem is, they are too broke to even file bankruptcy, because they can’t afford the bankruptcy attorney fees. It may be a common refrain for you, too: “If I had the money to file bankruptcy, I wouldn’t need to file!”
When you realize that bankruptcy is your best choice for getting back on a firm financial footing, here are some tips for coming up with the cash to file a Chapter 7 or Chapter 13 bankruptcy:
1. Once you make the decision to file bankruptcy, you can stop making payments on debts that ultimately will be discharged in the bankruptcy, such as most credit card debts. If you’re currently paying on your credit cards, that alone is likely to free up enough cash in a few months to pay your bankruptcy attorney and filing fees costs. Stop paying your mortgage. If you want to keep your home, the mortgage company will work with your bankruptcy trustee to create a modified payment plan to help you get current. If you’re not paying on any credit cards or a mortgage, read on….
2. You can sell assets, particularly ones you might have to give up when you file bankruptcy – like an extra car (car pooling for a while isn’t the end of the world, I promise)! Collections, big screen tvs, “adult toys like snowmobiles, etc. – anything like that can generate some big extra cash.
3. A friend or relative may give you the money to file. Who might be willing to gift you money? Ask for cash for gifts – be upfront – tell people you’re saving up money to get out from under your debt and the best gift they can give you this year for the holidays or your birthday or other special occasion would be cash.
4. Ask your employer about any employee assistance programs for people in serious debt trouble. Many employees these days will pay all or a portion of your attorney fees and filing fees. Getting your mind off the stress of your financial situation and back focused on your work is a great incentive for an employee to help you. Especially if it will help them avoid the hassle of dealing with your creditors trying to attach or garnish your wages. It never hurts to ask, but if that’s too scary, here are a few more options.
5. Sell anything you can – but not if you have any intention of buying it back from the person you sell it to. That would be fraud. If you sell anything to a relative, make sure that it’s crystal clear that you’re selling it to them for their personal use, not for yours. Make sure they pay you full value and give them a bill of sale. Little things add up to big bucks – books, clothes, electronics, sports equipment, tools, kitchen gadgets, antiques, small appliances (and even large unnecessary ones), bikes, boats, exercise equipment, jewelry, collections, instruments. Thomas Jefferson sold his book collection three times to save his farm. Look at the things you think of as “essential” including artwork, entertainment units, furniture. Unless something is considered a tool of the trade for your work, chances are it wouldn’t be exempt anyway. Our emotional attachments often get in the way of us making sound financial decisions.
6. Pick up extra jobs – cleaning houses, yard work, babysitting anything that brings in extra money without costing you anything (but avoid the “work from home, buy our material, attend our seminars we’ll show you how to sell our products and services and make big commission kind of deals”). What friends or relatives have odd jobs they need done? Washing cars, shoveling snow, cleaning out gutters, garages, spare rooms, weeding or yard work, something else where you have some expertise? Stuffing envelopes, fulfilling orders, putting together equipment, helping set up someone’s quickbooks, doing data entry, research, car repairs, whatever. Think outside the box.
7. Eliminate every excess expense for 30 days. Shut off the cable, cancel subscriptions, turn off the internet, cancel memberships, don’t renew anything except the essential resources. No gifts, no movies (rented or at the theatre), no lottery tickets, no fast food, no extras at the grocery store, no prepared food, no snacks, sodas, coffees, bottled water, anything out. You will be amazed at how quickly in 30 days you can generate some significant cash just by eliminating these expenses. Brown bag lunches, anything and everything you can think of to save even a few cents. Make getting free from your debt the most important thing in your life – more important than cigarettes, beer, ice cream, haircuts, pedicures, private school, anything….
And here’s one final tip of what NOT to do….
Don’t borrow money from anyone or from your retirement accounts. Borrowed money is a loan, and if you don’t list this new debt on your bankruptcy forms, or you list it and say you’re going to reaffirm that debt and pay it over other creditor’s debts you wind up committing fraud or running the risk of having your bankruptcy dismissed. It’s not worth it.
Paula Langguth Ryan is the author of Bounce Back From Bankruptcy: A Step-By-Step Guide to Getting Back on Your Financial Feet. Now in its 4th edition, this consumer bankruptcy recovery resource is highly recommended by consumer bankruptcy attorneys and trustees nationwide.
For more tips on how to know if it’s time to file bankruptcy, and what to do after bankruptcy to get started rebuilding your credit and your life, visit the Bankruptcy Tools at www.paulalangguthryan.com and check out the Life After Bankruptcy Monthly Member Support Group, our books, and our free How to Know If It’s Time to File and How to Travel Without Credit reports. If you’re feeling financially overwhelmed and considering bankruptcy you may also want to invest in a Considering Your Options consultation at http://www.paulalangguthryan.com/coaching/#considering