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Is bankruptcy the easiest way out?

I have found my personal circumstances pretty hard after an accident on a weekend away from work meant I couldn’t do my trade as a plumber. I don’t have insurance but I have debts for cars, a house and stuff bought on credit as well as store cards. Before the accident we managed pretty well, except when interest rates went to 9 per cent or more. I fear going bankrupt but it might be the easiest way out. We do have some savings which could get us through but I don’t know if I want to risk wasting this money and still end up bankrupt. What do you think?

A bad or no plan got you here and so a good one might get you out. Let me run through your options. You can sell assets and change your lifestyle. No cars might mean riding the bus but might be the way to go. You could sell the house and it could be emotionally hard, but it could be easier to cope with than being declared bankrupt which stops you from borrowing for a period of time. You can put your life on the lawn by doing a budget to see where you’re wasting money. A part of that can be what I call GST’ing your life, which means putting a self-imposed 10 per cent tax on all of your spending. You could ask your creditors if you can pay off the debts over a longer time. There’s nothing wrong with asking creditors for a break to make a lesser payment. Sometimes some payment is seen as better than none when you declare bankruptcy. You can use the strategy of paying off old debts first and leaving current ones to later.

Also, talk to your bank, an accountant, financial adviser and a financial counsellor before there’s no time left or money to get the best solution. Don’t rule out moving in with the family and even renting the house. Rents are high now and there’s a shortage of properties. And your interest becomes tax deductible. An old fashioned solution is to take in a lodger — a student possibly who could help boost your weekly income. You might also think about two jobs to make up for the good plumbing job you now can’t do.

There are a number of options and government departments have financial counselling services, so make sure you get some help. Good luck with it.

For advice you can trust book a complimentary first appointment with Switzer Financial Services today.

Important information: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice. 

Published on: Tuesday, March 09, 2010

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