Get Out of Debt Guy

Bankruptcy is Often the Best Solution for Debt Problems

Posted February 13, 2013
Updated July 10, 2013

Here is something you don't expect to hear people say, "If you file bankruptcy your life will get better."

Well, I did file bankruptcy and my life did get better. Within three years after our bankruptcy we had purchased a house and before that had rebuild great credit using secured credit cards.

In fact for me, my financial failure and bankruptcy became my greatest strength in helping people. Without my personal bankruptcy I wouldn't be here helping you.

Want to know the one thing I would change about the process? Without a doubt I'd have eliminated all the fear, shame and stress that came along with filing bankruptcy. All of that was created by my silly unfounded assumptions about life after bankruptcy. None of it was based in reality I would come to find out. My bankruptcy attorney just did a lousy job helping me overcome my incorrect assumptions about bankruptcy.

Famous People That Filed Bankruptcy

When you file bankruptcy you join a whole host of others who have lived through the financial tough times and survived. Not only will you have joined me in that bankruptcy club but also some others you might recognize like Larry King, Mike Tyson, MC Hammer, Willie Nelson, Walt Disney, Jerry Lee Lewis, Dave Ramsey, Thomas Jefferson, Abraham Lincoln (essentially), Henry Ford, President William McKinley, Milton Hershey, Rush Limbaugh, Burt Reynolds, H.J. Heinz, P.T. Barnum, Charles Goodyear, and on and on and on.

Bankruptcy Isn't the End of Your Life.
It's the Beginning of the Next Chapter.

I've been helping people with tough debt problems since 1994. In all those years I can count on one hand the number of people that played the system. All the other thousands and thousands of people that filed bankruptcy, needed to in order to restart their lives.

Nobody runs out and says I'm going to make mistakes and be the subject of an accident, illness, job loss, or natural disaster so they can wind up in bankruptcy. Stuff just happens.

Would you rather be poked in the eye with a sharp stick instead of filing bankruptcy? How about lose the love of your life? There are lots of things that are worse.

Let's look at what filing bankruptcy actually means. It means you are seeking the legal protection afford to you under the law so that you can get a second chance and a fresh start. It is a road from an impossible financial past to better financial future so you can financially protect your family better and move forward with your life.

Filing bankruptcy means you accepted responsibility for your financial mess, took action afforded to you under the U.S. Constitution and have made the decision that doing better is the best revenge against failure.

The question you really need to answer is this, "Do you want to spend the next five years trying to fix your financial past and struggle or the next five years building a stronger financial future and creating a safety net for you and your kids?"

Popular Bankruptcy Myths

So often I hear people say things about bankruptcy out of total ignorance. They make these statements from assumptions, not reality.

If you want to read the growing list of the most common bankruptcy myths, click here.

Steve Rhode

Get Out of Debt Guy


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  • steverhode Feb 14, 2013

    And let's not forget: At the end of every seven years you shall grant a release of debts. And this is the form of the release: Every creditor who has lent anything to his neighbor shall release it; he shall not require it of his neighbor or his brother, because it is called the LORD’s release” (Deuteronomy 15:1-2).

  • Pseudonym Feb 14, 2013

    Quote from angelienna: "Really an article that compares debt to slavery is a bit of a long reach."

    I guess God really was reaching then. From Proverbs 22:7 (NIV): "The rich rule over the poor, and the borrower is slave to the lender."

  • steverhode Feb 14, 2013

    My overall point with the advice I offer is that people examine all of their options and then make a logical and educated decision about what is best for them based on facts, not assumptions.

    When I wrote the article I was trying to demystify bankruptcy to remove some of the untruths about it and talk facts. At least the article has resulted in this healthy discussion.

    I applaud your discussion with your husband about your situation and you might find the Get Out of Debt Calculator a good place to start. See

  • nitabitasmith Feb 14, 2013

    Thank you for the insightful article. This is an option I will be discussing with my husband as we work towards being debt free.

  • steverhode Feb 14, 2013

    Interesting examples. But isn't your position that people need to be personally responsible for their financial situations? So in the divorce example, if one person is a joint account holder and the other spouse is supposed to pay but doesn't, wouldn't your previous statements make it seem they need to accept full responsibility anyway?

    The point is that it is not as clear cut as people would hope. It's messy and murky. In fact financial problems are math problems wrapped in emotion.

    If you think a lot of people file bankruptcy for the heck of it, you'd be wrong. The facts and statistics just don't support that fact. The reality I see are people that need to file because they are in situation like you describe, but don't for fear of what others will think, rather than what's best for them.

    Also remember, the debt isn't the problem, it's the symptom of the underlying issues that got people into trouble.

  • angelienna Feb 14, 2013

    Just because the government does it, doesn't make it right?

    Because I am a human, with morals... I am also not saying that for some people it is the only option.. for example in a case of divorce.. if your ex spouse files, then you have to because all creditors then come after you and the entire financial burden is on you. In cases of extreme medical bills, those people did not CHOOSE the medical bills.. but in cases where it is car and credit card debt.. that is by CHOICE.. that is the difference. I am merely saying the article is written in a manner that takes personal accountability out of the equation.

  • steverhode Feb 14, 2013

    Isn't it interesting that Wall Street rewards airlines that reorganize under bankruptcy but consumers think poorly of those that seek the same protection afforded under the U.S. Constitution.

    Why the doble standard?

  • jet Feb 14, 2013

    "sending the wrong message especially to a generation of people that are already lacking in the personal accountability department" from another post.

    Our Government, Banks, and Businesses have been the "model" of embracing bankruptcy and handouts for decades. These institutions stopped following any "moral" code long ago.

  • steverhode Feb 14, 2013

    And that is most certainly your point of view. But people should also not be made to feel guilty because they elected to exercise their right under the law to deal with their problem debt.

    If your belief is that people should use protected retirement funds to deal with problem debt, typically from an unexpected and medical situation, then that is your perspective.

    So let's look at another example from yesterday. A reader is disabled and her husband just had two heart attacks and can't work anymore. Both are in their late 60s. Should they use their little bit of savings from their 401(k) to repay their creditors or is bankruptcy a reasonable solution?

  • angelienna Feb 14, 2013

    Really an article that compares debt to slavery is a bit of a long reach. My debt is clear, my conscience is clear and while I don't judge anyone who has chosen that path, I merely think that your article comes across as if you are recommending people not be held accountable for their debt. Maybe it is a tone you are using to make people 'feel better'... but again I think that you are taking it too lightly and helping others take it too lightly. Accountability is an issue in this country and while I think you have some good value, my question is this.. why would a person have enough money in an IRA to get themselves out of debt if they can't afford their debt. It sounds like there is a bigger issue. And I do believe that if you have a way out, you should do it yourself. You can continue to work and add to your IRA. I know from a numbers perspective you will tell me I am crazy, but if you have assets, which a retirement account is, then you shouldn't declare bankruptcy.




About this Blog:

Steve Rhode has had careers in opthalmology, real estate and as the head of a nonprofit debt counseling firm. On his blog, he offers hard-won, free advice about getting out of debt, consolidation and making the right choices as you manage your money.