Getting From Point A to Point B With Money

Categories: Chapter 13, Chapter 7, Debt Collections, Exemptions, Family Law and Bankruptcy, Student Loans & Bankruptcy

Taking a trip is exciting. You have a staring place [“Point A”] and a destination [“Point B”]. Along the way, is the “journey.” Getting from Point A to Point B is simple when it’s a road trip because we look at a map, or nowadays, we’ll just plug in our destination into our GPS system, and the road to our destination appears before us.  Thinking in terms of a trip or vacation, we see that the journey itself can be just as important.  For example, if it’s a road trip, you might want to plan stops along the way.  However, when we turn to our more important life decisions, we’ll likely want a shorter journey; like the quicker, better, and faster way to either end a medical issue or financial issue; right? Getting from Point A to Point B is something we do all the time, yet we don’t always apply it in the context of goals, desires or personal journeys. Let’s discuss getting from Point A, where you’re in debt; to Point B, the destination of being completely out of debt.

Some would say that knowing where you are is the most important point.  Maybe you’ve heard, “You’ve gotta start somewhere.” Well, I say that there is place than where you are financially, to make a decision to get out of debt. I say the Point A, in this equation, is the decision to get out of debt, not the fact that you’re in debt. This is because I’m beginning to think that there aren’t too many people with enough desire to end their suffering of too much debt to even take the journey from Point A to Point B, and live life without debt. Once you’ve decided to take that journey to get out of debt, the road to Point B can be paved with uncertainty, fear, confusion and landmines.

There are so many choices to make in terms of how to get out of debt, that many people are paralyzed and do nothing at all, which is also a decision, if you ask me. What I wonder is, why would you make the decision to get out of debt without exploring all of your options?  Why would someone choose a longer, more expensive route to their destination, than the next person.  I’ve discussed options for getting out of debt here, and here. There are a limited number of ways to get out of debt, many of which don’t event eliminate debt.  Two such options; “doing nothing,” and “borrowing money,” only make matters worse when trying to get out of debt. Many of my clients have tried these first, only to come to me for bankruptcy later.

Another popular option are these debt consolidation, or debt settlement companies. At first, paying less than you owe on a debt sounds like a good idea.   Say you have a $10,000.00 credit card debt that you’ve been able to negotiate 1/2 off.  Now, you only owe $5,000.000.  If you had $5,000.00 available, it might be a simple solution.  But don’t be surprised that tax bill at the end of the year for the portion of the debt that was cancelled.  So, debt settlement requires a large payment and likely a tax bill.  I believe that debt settlement is right for those who have funds readily available and where filing bankruptcy is not an option.  The biggest problem with debt settlement or consolidation of debts is the credit repair that must follow.

The least popular option for getting out of debt is, for the most part, the cheaper, better, and faster way to get out of debt; Bankruptcy.  If you haven’t already clicked on the links in the second paragraph, take a moment now to do it.  In those articles, I run through the math on the savings by pointing out that someone who files a Chapter 7 bankruptcy, which is a liquidation case where you make no more debt payments, saves the most money and eliminates their debts immediately.  Even someone who pays back their debts in full in a Chapter 13 repayment plan bankruptcy, can save tens of thousands of dollars over any other route toward freedom from debt. What I can’t seem to figure out is why more folks don’t ask themselves the question of which route will get them out of debt faster and for less money.

A colleague and friend of mine, Ron Drescher, Esq., (@rondrescher) who practices bankruptcy on the east coast, wrote a book entitled, File Bankruptcy and Get Rich. I think he’s right.  Some very wealthy folks have filed bankruptcy before they struck it rich.  Dave Ramsey filed bankruptcy and had a bad experience, so he started his business on a mission to help others avoid bankruptcy.  Walt Disney filed bankruptcy before Disneyland. JCPenny filed bankruptcy.  Donald Trump has filed six times on several of his businesses. I think you would be surprised at the people who are now doing well financially, after dumping their debts off at bankruptcy court.

Finally, at some time, you may reach Point B.  Whether you get there by paying off your debts in full and on your own, or file bankruptcy, you’re there.  How you get there can be the difference of both time and money.  This reminds me of a trip I took to San Francisco that once took 12 hours.  My husband had planned the trip and scheduled a flight from Los Angeles (LAX) to San Francisco (SFO) airport.  What he didn’t know at the time is that SFO gets socked in with fog and our flight was delayed.  Then, due to a mechanical problem, our flight was returned and we then needed to hustle and catch another flight.  Driving there at this point would have shaved off both time and money for us. Had my husband known about the inherent weather problems, he could have easily booked the flight to Oakland and we could have taken the train over to the city. The moral of the story is that having enough information to make a well informed decision, not only as to setting the desired goal (“Point B”), but the path to getting there must also be considered.

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