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Friday, October 8, 2010

Eight steps for a Christian to take when deciding if bankruptcy is your best available alternative

Eight steps for a Christian to take when deciding if bankruptcy is your best available alternative

Bankruptcy is never an ideal, but in some cases is a best available alternative.  Many Christians are finding  that bankruptcy is currently their best available alternative.  Personally, I believe bankruptcy at times is the best available alternative.  Remember, there are financial implications.  A Chapter 7 bankruptcy may remain on your credit bureau report for 10 years. A Chapter 13 may stay for 10 years also, but it is typically removed after  7 years.  There are emotional implications.  People who declare bankruptcy feel remorse, loss, and isolation.  There are relational implications.  There are spiritual implications.

Eight steps to take when deciding if bankruptcy is your best available alternative
  1. Discuss the situation openly with your church leaders.

    Depending on you church structure that might be a pastor, minister, elder, or deacon.  In the conversation, openly disclose the pertinent details about your financial situation.  This discussion can be useful for three reasons.  First, your church leader may be able to provide some spiritual and biblical perspective on the situation.  Tell the church leader you want to be sure you completely understand what the Bible says about bankruptcy.  Second, the church might be able to provide some financial assistance if it appears the bankruptcy could be avoided with some help.  Third, the church leader may be able to refer you to a Christian financial professional who can assist you.
  2. Keep Everything in Perspective.

    A bankruptcy can consume you financially, emotionally, and relationally.  Seek to ensure that your family and your home is not destroyed in the process.  Embrace those who are important to you.  Cling to your relationship with God.  Keep some energy to invest in your family.
  3. Pursue every available alternative with your creditor.

    Bankruptcy is the result of a two party relationship gone bad.  The first is a shortage of cash on your part, and the second is an inability to compromise on the part of the creditor.  In your discussions with your creditor, be truthful and factual.  Let them know what you do have, what you can do, and the implications if they do not work with you.  They want you to avoid bankruptcy as much as anyone because if you declare bankruptcy they don’t get paid.  Frequently ask, “What are my options”?
  4. Postpone speaking to a lawyer for as long as possible.

    Do you think it is in the best interest of the bankruptcy lawyer to advise you against bankruptcy?  No.  They will offer you a sales pitch, not advice.  By the way, if it does become necessary to find a lawyer, find someone who can offer a referral.
  5. Seek the most ethical form of bankruptcy.

    For example, a chapter 13 bankruptcy will allow you to set new repayment plans with your creditors.  In a chapter 7 bankruptcy you give up your rights to what you own (with expectations).  Even during this stage of bankruptcy consider what you can financially do, but also what is best for those who loaned you money in good faith.
  6. Learn your lesson.

    If it is necessary for you to go through a bankruptcy, consider it as the greatest learning opportunity of your life.  The bankruptcy was the result of a broken system.  If that system remains broken then bankruptcy will once again be in your future.  Be sure you can answer the following questions: Why did I go into debt? What needs to change this second time to be sure it never happens again?
  7. Commit to learn everything you can about personal finances.

    This is much like #5, but number five only deals with what you already know.  However, for there to be a real change you need to add some fresh material to how you think about money.  There are a number of great personal finance blogs written from a Christian perspective.  There are some wonderful books written on personal finances.  If you are not much of a reader, consider listening to shows on personal finances.  Regardless of how you learn, the important thing is to learn some new things about personal finances.
  8. Make restoration in the future, if possible.

    If the bankruptcy allows you to pull out of a current financial slump and your financial situation improves I would suggest you do go back and contact those creditors and pay them back.  You may have absolutely no legal requirement (depending on the specifics of your bankruptcy) to this, but morally you still have an obligation when you are able to repay.
While bankruptcy is never a good thing there are situations where it is the best available alternative.

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