Aftershock: Protect Yourself and Profit In The Next Global Financial Meltdown, Second Edition

What about Bankruptcy?

In early 2009, we saw a personal finance article suggesting that readers not wait too long before filing for bankruptcy. It suggested declaring bankruptcy to get rid of credit card debt while you still have a job. The article also advised readers to not use up all their assets paying a mortgage that was too expensive or underwater. In fact, the article suggested just letting the mortgage go unpaid because the foreclosure process could take a year or more to complete. During that time, while you were no longer paying credit cards or a mortgage, but still had income from a job, you could put some money away.

At the time, we were a little surprised to see such bleak, hard-nosed advice in a personal finance column, which is usually much more upbeat. It was a sign of the changing times. We agree with the advice. Better to face reality and plan for the future, than keep running full steam ahead down the wrong track. Try not to be emotional, just realistic.

The first thing you need to know about bankruptcy is that, after all the bubbles pop and unemployment shoots up, many, many people will declare bankruptcy. It may feel lousy, but truthfully, it will be a logical course of action for many people. Also, at that point, virtually no one will want or be able to get more credit anyway, so bankruptcy won’t be that terrible. There won’t be much money available to borrow, it will be hard to borrow it, and even if you can qualify to borrow money, the terms will be very ...