A reader is scared to death of bankruptcy. But it might be a new lease on life.

Question: I called a credit counseling agency and went through the free process, but they said I should consider bankruptcy and I hung up. 

I owe $22,000 on seven credit cards because I was laid off but still had to take care of my declining parents who have very little to live on. I work part-time but can only cover my living expenses. That means I have nothing left to pay the credit cards.

I have a mortgage and a car loan that’s killing me because I’m upside down on it and can’t get out from under. Is there anything besides bankruptcy available? I don’t want to admit that I’m a failure.

— Pauline in Florida

Steve Rhode answers…

I hear this all the time, and it pains me. Declaring bankruptcy does not make you a failure. Let me repeat that in capital letters: BANKRUPTCY DOESN’T EQUAL FAILURE.

How do I know? I declared bankruptcy myself. Let me repeat this out loud…

Bankruptcy is a scary word. It’s a word that a lot of people fear. They think that they’re going to be losers; terrible people if they file bankruptcy. Yet so much of what you hear about bankruptcy is just not true. People who file bankruptcy save more for retirement, their credit scores improve faster, they’re able to buy cars and homes faster.

There is a time to use bankruptcy. It is a legal option to you. And only by evaluating all of your choices: bankruptcy, debt settlement, credit counseling, loans. Only then can you make a decision that is best for you. Don’t be afraid of bankruptcy. In fact, I went bankrupt. It wasn’t wonderful, it wasn’t special. For me, it was depressing, I felt all alone, and I didn’t know who to turn to. But there are great people here that you can turn to for help, who care about you and can help you. And maybe bankruptcy is right for you.

If you’re curious, you can read all about my bankruptcy. I’m very public about it. Even proud.

How can I be proud about something like that? Because I triumphed over adversity, and I learned from my mistakes. In fact, I learned so much, I counsel others about debt. I not only recovered financially, I excelled. I now have enough money to spend it rescuing animals in my airplane.

I hope I’ve punctured the myth and stomped the stigma about bankruptcy for you, Pauline. Now let’s break this down…

Credit counseling

Kudos, Pauline, for consulting a credit counseling agency. If it was a reputable one, you received a free debt analysis. (How do you know it’s reputable? The nonprofit has been around for decades, has an A-plus rating with the Better Business Bureau, and has many excellent reviews online. Learn more in Debt.com’s Credit Counseling section.)

Need help deciding which solution is the best choice for your unique financial situation? Talk to a certified consumer credit counselor now.

Free Evaluation

Bankruptcy isn’t DIY

If you were instructed to investigate bankruptcy, you can educate yourself online. I’m biased, since I consult with Debt.com, but I’d start with its report, The Pros and Cons of Bankruptcy.

Bankruptcy demands you consult an expert, and Debt.com can introduce you to someone. Once you get past the stigma of bankruptcy, this is the hardest part. Fear of a complex process is enough to make some folks shut down and bail out. Stick with it, though.

The aftershocks of bankruptcy

Yes, you’ll suffer some after bankruptcy. Your credit is going to take a huge hit. We’re talking 7-10 years. There are things you can do, though. Reassure yourself by reading 5 Tips For Post-Bankruptcy Credit Repair.

I can’t give you more specific advice about your situation, Paulina, because I don’t have nearly the details your expert will compile. But I can tell you: Bankruptcy is just a tool, a thing, a process. It’s legal and it works. Sure, it’s serious and not at all fun. Once you get through it, better times await you. Trust me, I know.

Steve Rhode is known as the Get Out of Debt Guy and has appeared on FOX, CNN, ABC, NBC, and MSNBC giving money advice.

Meet the Author

Steve Rhode

Steve Rhode

Expert contributor

Rhode has been writing since founding a nonprofit in 1994 to help people get out of debt.

bankruptcy, credit repair

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Article last modified on October 24, 2018 Published by Debt.com, LLC .