Accountants generate a report called a “cash flow statement.” It is a fancy way of deciding whether you are spending more than you are making; in other words, if you are “in the hole.” “In the hole” is not a technical term, but I like to refer to it when talking with people about whether Bankruptcy might be an option for them.
That’s because many of my clients have a feeling that they are trying to dig their way out, but others are throwing dirt in on them faster than they can shovel it. It is very difficult for many people to determine that they are actually in this sort of quicksand. Credit card tactics do not help. But, this is the point where I advise people to seriously consider bankruptcy. Bankruptcy, amongst all possible solutions, addresses the underlying cause of financial difficulty – the fact that you are “in the hole.”
In essence, the Bankruptcy Code understands what few people will tell you: there are only two ways out of this morass: 1. Earn more revenue, or 2. reduce debt and spending. Earning more revenue is a great solution if you win the lottery, but it’s not an option for everyone. That leaves reducing debt and spending. A Chapter 7 bankruptcy will eliminate most unsecured debt. A chapter 13, both reduces your debt and helps you develop a plan to reduce spending in the future. When is Bankruptcy the way out?… when you need it to be.
