Should You Walk Away From Crushing Debt?

Should you walk Away from Crushing Debt?  I talk to women in business every week about money and where they are at with debt and I feel their pain. While I was speaking in front of a group of small business owners a couple weeks ago about the mistakes women make with money an older woman, I'll call Joan, had tears running down her face. Joan got up to leave quickly after I finished and I walked out with her. Over 60, no income to speak of, debt she can't pay, overwhelming bills, but is still trying to pay what she can, has a house mortgage that's upside down, and doesn't know what to do.  I recommended she talk to a bankruptcy attorney. She had and didn't have the money to pay the attorney. I also suggested she ask her friends for contributions of whatever they can afford to help her with towards the attorney's fees of about $1200.00. And, I offered the first amount.  Shame and guilt keep us from asking for help. We have to forgive ourselves and get over that because we do need help at times. 

Here's another alternative by Nicholas Carroll who wrote "Walk Away From Debt for a Better Future," and writes for The Huffington Post. He has a little different take on why people SHOULD walk away from debt.  He says, "it is the responsibility of local business owners, business managers, and the self-employed to support their employees and 9-to-5 friends in walking away from crushing debt and keep the money in the community. Mr. Carroll says when we pay on debt the money leaves our communities, but when we stop paying and then use that money in our local communities, it benefits our area, not Wall Street. Carroll goes on to say that we can't look to Washington, D.C. for help and many company employees want to do the RIGHT thing and pay their bills, but are drowning in debt.

If you know how to set up budgets and look at the big financial picture, sit down with your friends or employees and help them figure out where they are - the total debt owed, the amount of the loan mortgage, interest and payments (if the house is over 100K upside down), credit card total debt, and really consider what the payment is, whether you can afford the payment and how long it will take for the value of the house to catch up). If necessary contact a bankruptcy attorney who can walk you through the process to decide if bankruptcy is the right choice.   

Do you think Mr. Carroll has a good point that morality has kept many good people from walking away from debt at their expense, rather than Wall Street's?  He says the new moralty is to support friends to walk away from crushing debt and in doing so support our communities to keep money flowing.

Feel Like a Money Victim: Here's What To Do About It

Deborah Price, International Money Coach and author of Money Magic, says too many people feel like money victims right now. A victim is characterized by powerlessness, hopelessness, and blame which is often the result of a great loss. Americans have good reason to feel victimized - from job loss and downsizing to fear of losing a job if they don’t work unreasonable hours, to short sales and foreclosures - there’s a lot of economic pain to spread around. And, the emphasis is on fear, which is not a good place from which to problem solve.

We can’t afford to hang out in this victim mentality for long though. The danger is that the longer we collectively feel powerless, the more we get stuck in a fear-based, blaming, self-pitying problem oriented point of view.

David Kruger, M.D., author of The Secret Language of Money, says the major negative result of the economic crash of 2008 is that it created a “crisis of confidence.” The major purpose of the $700 billion bailout was to “restore public confidence.” In other words, the massive public-works” program was to keep us from escalating the fear that gets activated when we’re our brain is in the reptilian or survival part of the brain. What we need is to calm down and shift into the forebrain where logical problem solving can occur.

The good news is that American’s have traditionally been solution focused; not victims, but victors.  Practically speaking: when you find yourself in a state of fear, stop, take a few deep breaths, feel your feet on the ground, remind yourself of whatever you have to be grateful for – this simple action releases the STRESS overreaction of the reptilian brain and increases endorphins. Good decisions come from the forebrain. Repeat the calming method as often as needed and don’t make major decisions when you’re in overreaction or fear. Calm down, then problem solve.