SERIES: I’ve Declared Bankruptcy – Now What? – Part Two

I’ve declared bankruptcy. Now what?”

This is a combination “statement – question” that millions of people have made over the past few years. According to the United States Courts website (HERE), 1,221,091 individuals and companies declared bankruptcy in the U.S. in 2012 alone. We’re launching this series to help people who have went through bankruptcy so they never go back and so they can prosper!

Part Two Identify the root cause of what resulted in bankruptcy.

In your quest to move forward financially and to never again have to declare bankruptcy, it is vitally important that you conduct a detailed autopsy on what resulted in the death of your finances. What were the underlying real issues that created the financial mess? This can be a difficult process because you may have to sift through some painful memories, but this is what can help you never return to being totally broke.

The root cause is the real reason that bankruptcy occurred. If one is not really searching to fix the issue, they might say that the root cause of bankruptcy was that “they just felt overwhelmed.” Being overwhelmed is not the root cause. It is a feeling created by a deeper issue. For example, suppose this individual had purchased a new car and a new house, and then lost their job two months later. This situation certainly can create feelings of being overwhelmed, but we now have identified a contributing factor: job loss.

But the job loss is not the real root cause either! The REAL root cause is the fact that a new car and home were purchased without having any financial margin (savings) stored up “just in case of” a major negative financial event. Therefore, the real root causes of the situation are:

  1. NO SAVINGS  “Not having financial margin stored up”, and
  2. NO MONTHLY MARGIN  “Living against the edge by having all income pledged away to loans”

Do you see the process?

Here are some helpful questions to ask when determining the root cause(s):

  1. Did this happen because of one major poor financial decision or because of a series of poor ones?
  2. When did the situation become unmanageable? What made it that way?
  3. Why did you decide to declare bankruptcy?
  4. What could I have had in place that would have prevented bankruptcy from happening?

This is not about assigning blame and creating guilt. It is all about identifying the real culprit of bankruptcy so it can be addressed and prevented from ever causing bankruptcy again!

Read the entire series (available after 3/25/2013)

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