I have long counseled my clients that bankruptcy should be viewed as a “strategic retreat” as opposed to a failure or embarrassment. In a capitalist society, people take risks, and innovation and prosperity springs from that risk taking. While you may not own a company, you are in charge of what marketer Harry Beckwith calls “You, Inc.” Every decision you make – whether it is buying a house, using your credit cards, choosing to buy or not buy insurance – has consequences and sometimes you will find yourself with a lot more bills than ready cash or prospects for enough cash.
As a bankruptcy lawyer, I see Chapter 7 and Chapter 13 as financial tools. It is not my role to past judgment on your decisions or make you feel guilty about making a particular decision. My role is to serve as a trusted financial confidante to help you understand the pros and cons of the powerful financial tool called bankruptcy.
In fact, when you do appear in bankruptcy court you will note that lawyers for your creditors, the trustees and even the judges are focused on financial solutions. Guilt and blame are not part of the equation. Like any other financial tool, bankruptcy requires you to follow certain rules, but the underlying meme is financial not emotional.
I am by no means alone in positing that your consideration of the bankruptcy option ought to arise from a reasoned, thoughtful and logical consideration of both bankruptcy and non-bankruptcy options. My colleague Frank Pepitone, a bankruptcy lawyer in Garden City, New York, argues that bankruptcy should be viewed as a type of rehabilitation. Here is his thoughtful analysis:
Bankruptcy as Financial Rehabilitation
In our society, when people face emotional or physical problems, many will seek therapy. Therapy can be as simple as talking things out with a family member or friend. In more extreme cases, people will seek the help of a professional in order to work though their problems.
Rehabilitation for substance abuse, emotional trauma or physical injury are all forms of therapy designed to identify and correct an existing problem while providing the tools to move on successfully into the future. When people hit “rock bottom,” they toughen up, gather their courage and take these affirmative steps to get better and improve their lives.
Most individuals facing bankruptcy have hit their financial rock bottom. The bankruptcy process, along with the help of an experienced bankruptcy lawyer, can serve as the financial rehabilitation needed to springboard into future financial freedom, happiness and success.
The Rehabilitation Process
You are outside playing with your children or you are playing Sunday softball with your friends. You twist your ankle, tweak a knee or pull your shoulder. You pay a visit to your doctor, but other than the standard pain medication, there is nothing he/she can do for you. It is recommended that you start a physical rehabilitation program.
Through the rehabilitation process, you work with a physical therapist. With the help of this therapist, you identify the root cause of the injury and what steps can be taken to prevent future injury. You work together to repair and strengthen your body, fix whatever is wrong and ease the suffering. Through this process, you are given the tools to move forward post rehabilitation to continue to better yourself physically.
This physical recovery progression is not that different from the financial rehabilitation encountered when you file for bankruptcy. Instead of visiting a doctor, you have consulted with your accountant, financial advisors or a credit counseling company. They simply cannot help you so they advise you consult with a lawyer.
The bankruptcy lawyer is your financial therapist. Through the consultation and future interactions with your lawyer, you will identify the root cause of your financial distress and determine what affirmative steps can be taken to counteract future financial hardship. Experiencing the bankruptcy process, you will strengthen and repair your financial situation. If all goes well, your case will culminate with your discharge and you will be granted the fresh start that you deserve.
This is the post rehabilitation stage where you must move forward and take positive steps to rebuild your credit and secure your financial future. Any bankruptcy lawyer worth his salt will have provided you with the necessary tools to make this happen. Your lawyer should provide you with some basic financial planning advice as well as the necessary steps to take post-discharge to repair and rebuild your credit.
Five Step Program
Like other forms of rehabilitation that institute a “step program,” I like to think of the bankruptcy process holistically. This process includes five steps that take you from financial rock bottom to financial freedom.
- Admit the problem. Many people facing financial ruin refuse to admit that they are struggling. They will continue to make minimum payments, borrow from Peter to pay Paul and basically do anything possible to stay afloat. The first step is to address these financial issues by speaking to family, friends or trusted advisers. By admitting that there is a financial problem, it allows you to…
- Seek professional help. By consulting with an experienced bankruptcy lawyer, you will get sound financial advice on dealing with debt and develop a plan to solve these problems. At this point, the damage is already done, so by speaking with an attorney, you can start to…
- Repair the damage. This repair and reconstruction is done through the bankruptcy process. You are able to address and correct your financial woes through bankruptcy and hopefully emerge debt free with a fresh start. After completion of bankruptcy, it is your responsibility to…
- Rebuild your finances. Post-discharge, it is your obligation to work to improve your credit and your financial status. You are not alone and your bankruptcy lawyer should advise you on the safest and smartest ways to rebuild credit and improve your scores. Finally, and maybe most importantly, you must engage in…
- Prevention. This is probably the area where most of us fail. You must work with your bankruptcy lawyer to implement a sound financial plan to prevent a bankruptcy redo. This could include general advice on spending, savings, investing and frugality. Engage your lawyer, ask questions and develop a plan to deal with future emergencies and periods of financial distress.
As with anything in life, it is ultimately up to the individual facing the hardship to make the necessary changes to improve one’s situation. For those of you facing financial hardship and struggling with debt, transform your thoughts and take the affirmative steps to resolve your issues.
Bankruptcy does not have to be a negative experience. It is a tough decision and a hard one, but with the help of an understanding bankruptcy lawyer, it could be a rehabilitative process that sets a positive tone for the rest of your financial life.
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Frank Pipitone is a Long Island Bankruptcy Lawyer and the managing attorney at Pipitone Law, located in Garden City, New York.