You no doubt have countless uses for the next stimulus payment. But if you’re like some people the very best use is to file bankruptcy. Like who?
Last week Congress passed the American Rescue Plan Act and President Biden signed it into law. Among Its many parts is the $1,400 per person stimulus payment—officially called the Economic Impact Payment. On Friday, March 12, 2021, the IRS put out a news release about these payments. This provides general information about qualifying for the payments, and the amounts individuals and families will receive. There are more details in this IRS Fact Sheet. For information on your own payment, “[b]eginning Monday [March 15], people can check the status of their third payment by using the Get My Payment tool… .”
As we said, for some people the very best investment of this money—or part of it—is on bankruptcy.
Fact: Most People Wait Too Long
Lawyers who help people in financial distress like helping people. That’s why most of them chose to get into this area of law. Just about every day we talk to people who clearly waited too long before talking with us.
Sometimes they simply put up with an emotionally challenging financial situation much longer than they needed to. But often people have made mistakes—big and small—in which they’ve significantly hurt themselves. It’s great to be able to inform people how they’re lives will immediately become less stressful and financially sane. But it’s painful to tell some people how much better it might have been had they gotten good advice earlier from a bankruptcy lawyer.
So when is paying for a bankruptcy case the best investment of your stimulus money? First, it’s when you owe too much and you really need relief—not just short-term but long-term relief. Second, it’s when you’re risking making one or more legally unwise decisions, ones that you’ll regret. We offer some guidance about these situations; on the first of these this week, and on the second next week.
You Owe Too Much and Need Long-Term Relief
Everybody wants to be responsible and pay their creditors. It’s usually the right thing to do. Even when it’s hard and takes sacrifice. You agreed to pay and you should fulfill your promise to pay.
But there may come a point when the debt is just too overwhelming. At that point the responsible thing to do is to admit that. And then learn your legal options about that debt.
How Do You Know When You Reach That Point?
We understand: figuring out when you’ve reached that point is often not easy. Here’s some guidance:
- You should not wait until the situation feels hopeless. If you wait until you are hanging on by a thread, you are risking too much. The law doesn’t require you to wait until you’re desperate. In fact it’s smart and sensible to learn about your options before you are emotionally and financially exhausted.
- Consider your responsibilities to others besides your creditors. Yes, you certainly have a legal and moral responsibility to your creditors. But you also have responsibilities to your children and your spouse or partner, if you have any. How much are you harming those dependent on you as you strive and strain to do right by your creditors?
- The relevant “responsibilities” go way beyond financial. There’s much more to this than not being able to provide financially for your loved ones while instead paying creditors. How much are you unable to be emotionally present to your kids and spouse while under intense financial strain? How much are you jeopardizing your short- and long-term relationships with the most important people in your life?
- One person who you are absolutely allowed to consider in all this is yourself. Your health, your relationships, your peace of mind—these are clearly relevant as you weigh whether you need serious relief. Indeed, you are not only allowed to, you MUST consider your health—physical and emotional—as you try to decide when enough is enough.
- One other big indication: you’re getting past the point of needing help when you start making questionable decisions. These tend to be financial, but can also be personal. Desperation often results in desperate and unwise decisions. In fact if you’re feeling desperate that itself is time to get help, before there are any unwise decisions made.
Next week we’ll cover the kinds of decisions that can really hurt you, and indicate that you need help now.