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Friday, December 20, 2013
Carrying Debt vs. Bankruptcy.... Would you rather save your behind or save your face?
Bankruptcy can seem so scary or humiliating that lots of folks resolve to just keep paying the minimums on their debts.
You know what it feels like to have more bills than you can pay. You don’t know how bankruptcy will affect you.
It seems easier to stay the course, pay the minimums, and plod along.
It may be sort of comfortable, and knowable, but it may be a life sentence of being in debt.
You won’t get ahead, for sure, but you don’t have to face the uncomfortable fact that you can’t really ever pay off your debts.
On the surface, it seems like a rational choice.
It’s allowed by the terms of the credit card agreement.
It saves you from looking at the big picture of your finances.
You still have plastic in your wallet.
But what’s the real and total cost to you of paying forever?
The non monetary cost
If you decide to live with overwhelming debt you’ll encounter costs that don’t appear on your balance sheet.
Being in debt is stressful.
One of the old surveys measuring stress listed financial problems as a major cause of stress, along with death in the family, divorce, birth of a child, and serious illness. Having a mortgage of more than $150,000 was deemed to be a serious source of stress. These days, I regularly deal with Californians whose mortgage debt is $500,000 to $900,000. By that definition, everyone I see is stressed.
Health professionals have long cataloged the bodily consequences of stress. It is not just something you live with and tough it out. It shortens life as well as detracts from the quality of life. I worry about the life expectancy of some of my clients.
However, new academic studies have expanded our understanding of stress.
And it’s not that it is the stupid who get into debt. It’s not that getting into debt was necessarily stupid.
The stress caused by debt reduces your ability to perform intellectually. You make new, bad decisions because of stress.
The researchers from Harvard tested IQ’s in a controlled setting in a shopping mall in New Jersey and in the field in a farming community in India.
Constant worry about paying bills intrudes on your thinking, and diminishes the mental resources you have to apply to all of life’s decisions.
In the American lab setting, financially worried subjects lost 13 IQ points. In the field, Indian farmers who got paid just once a year improved their IQ by 25% after the harvest when they had money in their pockets and no immediate money troubles.
Wherever it’s found, stress over money makes you less intellectually capable. No matter how you got into debt, being in debt reduces your ability to make good decisions about anything.
So, the challenge for those stressed by debt is to make good decisions about the alternatives to being in debt. That can be a tall order when you aren’t thinking well.
Get good information. There’s lots of it here on this site, from highly experienced bankruptcy lawyers.
Good financial counselors can assess whether you have a realistic chance to become debt-free in a reasonable time outside of bankruptcy.