A recent client asked this great question:

Is there such a thing as getting help to avoid bankruptcy? My wife and I have a small business.  We are struggling to keep it going.  We’re down over 50% this year, we’ve cut some expenses, and customer payments are dragging.  While we are not unique, and I am sure you have heard it before, but we would like to avoid drowning. Please let us know if you would be available/interested in a consult.

The short answer is YES!  We help people avoid bankruptcy every day.  Filing bankruptcy is something you do when nothing else works.  It is the last option.  The process of deciding to file bankruptcy is really a process of elimination–when no other option solves the entire debt problem you then focus on bankruptcy.  Partial solutions are no help.  Settling one debt or one lawsuit is nice, but if it does not solve the whole problem it is just throwing money away.  The benefit of bankruptcy is that it is a complete solution.

So how do we help clients avoid bankruptcy?


How much does it cost per month to get out of debt?  You must answer that question before you consider bankruptcy. This is a two-step process:

STEP ONE: List the debts.  Making a list of your debts is about as much fun as getting on a scale after going out for dinner.  There comes a time when you stop opening the mail and lose track of how much you owe.  It’s depressing so you avoid it.  If you really want to avoid bankruptcy you need to write down a list of who you.  Follow these steps to prepare a list.

  • Open the mail.  Stop throwing away collection letters.  Go through the pile of envelopes pushed to the corner.  Sort the debts, put them in separate files, use color-coded three ring binders, etc.  Do whatever it takes, but organize what you have.
  • Get a credit report.  Go to for a free copy of your credit report.
  • Search for lawsuits and judgments online in Nebraska.  Here is an article to help search the public records online.
  • Some debts do not appear on credit reports.  Just write the Name and Address of your creditors and estimate the amount you owe each.
  • Call creditors to figure out the balance owed.
  • Locate student loans using the National Student Loan Data System.
  • Write the interest rate charged by each creditor next to the balance owed.
  • Divide the list into Secured creditors (mortgage auto, furniture loans) and Unsecured creditors (everybody else).


  • Add up the list.  How much do you owe in total?
  • Divide the total by 36.  Can you afford that payment?  For example, if you owe $18,000 of debt, can you afford to pay $500 per month?  This is a rough estimate of what you need to pay each month to become debt free.  Call it the “Rule of 36”.
  • Consider a debt management company such as GreenPath to set up a debt payment plan.  I prefer counselors belonging to the National Foundation for Credit Counseling.


Most of the people in debt settlement programs should not be in them.  Most of the debt settlement plans I review have virtually no chance of succeeding.  Why?  You need money on hand to settle debts.  If you cannot raise enough settlement funds quickly enough the creditors will file lawsuits and begin garnishments before you can settle all the debts.  As a general rule, you need about one-third of what you owe in cash within 6 months of stopping payments to creditors to have any chance of settling all the debts.  Creditors will typically settle debts for about 40% of what is owed, but they want the settlement in cash now.  If you are able to raise cash quickly debt settlement might be an option.  We help clients settle credit cards and other debts every day, but only if we see a reasonable chance of all accounts being settled.


Can the creditor prove you owe the debt?  Has the Statute of of Limitations expired?  Can the creditor provide a copy of the credit card agreement?  Are you being sued for a medical debt that your health insurance should have covered?  Over 90% of creditor lawsuits result in Default Judgments.  We can show you how to respond to lawsuits and to demand an accurate accounting of the debt.


Sometimes a small business is so overcome by debt that it must reorganize.  Some small business corporations are so saturated with debt that it must start over.  It is possible to form a new corporation and start with a clean slate.  There are special rules to follow to prevent the old corporation from contaminating the new company, but this is a valid strategy to reorganize without filing bankruptcy.  Personal guarantees of business debts must be considered as well.

The bottom line is, there are many ways out of debt.  You need to consult with an attorney that carefully goes through each option.  That is what we do.  We can help you avoid filing bankruptcy if you visit with us before the situation gets out of hand.







Image courtesy of Flickr and David J. Dalley.