Money Matters: Imagine you’re standing in a financial desert. Your credit cards are howling like coyotes. The student loans are doing jazz hands. And your paycheck? That thing’s more like a rumor than a reality.

Most people in this situation try to “budget harder” or pick up a 4th side hustle selling handmade socks on Etsy. But there’s another option. One that sounds scary. Taboo. Even… shameful.

Bankruptcy.

But here’s the secret nobody tells you: sometimes, bankruptcy is not the end. It’s the reset button. And in a system designed to eat the little guy alive, it might just be your most powerful legal weapon.

Survey says: Here’s what the financial overlords and armchair moralists don’t want you to know:

• Over 95% of Chapter 7 cases get full discharge of debts. That’s right—gone. Vamoosed. Ghosted forever.

• Filers eliminate an average of $20,000–$50,000 in unsecured debt.

• Credit scores rise by 50–100 points within 12–18 months post-filing.

• 75% of filers get new credit within one year—because lenders know you're no longer a risk. You’ve already crashed and burned.

• Job prospects improve. Filers are 25% more likely to get hired and earn more than non-filers still buried in debt.
  (Sources: U.S. Courts, LendingTree, NBER)

Here is what on that portioned plate today:

😎 Our Favorite Resources
👍 When Does Bankruptcy Make Sense?
👌 Bankruptcy in 7 Steps
🤷‍♀️ What’s up for next week

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Cool Links

Our favorite resources

🆘HELP

The official federal resource explaining how bankruptcy works: U.S Courts

You must complete a credit counseling course before filing—this is the place to find one that won’t scam you: U.S. Trustee Program.

If you need free legal help with bankruptcy but can’t afford an attorney, this helps you find a local provider: Legal Services Corporation.

👀ICYMI

Student loans weighing you down? Check out our issue 6 Student Loan Payback Paths That Work

📜Quote

“How did you go bankrupt? Two ways. Gradually, then suddenly.” - Ernest Hemingway

Today’s Main Event

The B-Word: When Blowing It All Up Might Be the Smartest Move You Ever Make 

Let’s cut through the noise: if your financial situation feels like a flaming clown car careening toward a brick wall, bankruptcy might not just be a way out—it might be the smartest, most strategic decision you ever make.

No, it’s not sexy. It won’t get you invited to cocktail parties (unless it’s hosted by other broke geniuses). But it will stop the bleeding, kill the noise from collectors, and give you something most people haven’t felt in years: a clean slate.

In the next sections, we’ll walk you through when to consider pulling the ripcord, the types of bankruptcy you can file (spoiler: Chapter 7 is the “drop the mic and walk off stage” option), and how to actually do it.

When Should You Actually Consider Bankruptcy?

Use what we call the “3D Test”:

• Debt is unmanageable. You can’t even make minimum payments, and your balance keeps going up.
  

• Default is happening. You’re behind on bills, being sued, or facing repossession or foreclosure.
  

• Despair is real. The stress is affecting your health, your sleep, and your ability to function.

If you hit 2 out of 3? It’s time to talk to a pro.

Filing for Broke: Which Bankruptcy Chapter Lets You Rise from the Ashes?

Chapter 7: The "Pull the Plug and Walk Away" Move

This is the all-in, burn-the-boats bankruptcy. You're not negotiating. You're not fixing. You're hitting reset like a madman in a suit with nothing left to lose.

• Use this if: You’ve got no money, lots of debt, and nothing worth repo-ing except maybe a busted couch and a toaster oven with trust issues.

• What it does: Vaporizes your unsecured debt—credit cards, medical bills, personal loans. You file, you wait a few months, you walk.

• The fine print: You’ll need to pass a means test. Basically, Uncle Sam looks at your income and says either, “You’re broke enough,” or “Nice try, pay up.”

This is the chapter where you stop pretending the broken boat can be patched and instead float away on the life raft called freedom.

Chapter 13: The "I Can Fix This!" Method

This one’s for the folks who still have an income, some assets they want to hang on to, and just need the chaos restructured—not annihilated.

• Use this if: You’ve got a job, a house you’re behind on, and just enough stubborn optimism to think three to five years of adulting might just fix the mess.

• What it does: You propose a court-approved repayment plan. Creditors shut up. Foreclosures pause. You keep the stuff you care about and slowly crawl back to solvency.

• Catch: You must make those payments like they’re sacred scrolls. Miss them and your “second chance” gets yanked faster than a dad joke at a funeral.

This isn’t blowing it up—it’s rehab. Messy, sweaty, honest rehab.

You’re Ready to Hit the Big Red Button. Now What?

Filing for bankruptcy isn’t like summoning a spirit animal or asking your rich uncle for help (unless your uncle is a bankruptcy attorney). It’s a legal process, which means it comes with paperwork, steps, and the soul-crushing ambiance of a DMV—but it also comes with relief.

This isn’t about “getting out of debt”—this is about pulling the emergency brake on a speeding train before it smashes through your mental health, your relationships, and your retirement plan.

Here’s the seven steps toward your reset:

Step 1: Get Real With Yourself

Look in the mirror and ask:

Is my debt unpayable in any realistic timeframe?

If the answer is “yes, unless I win the lottery or find pirate treasure in the attic,” you’re ready.

Step 2: Find a Bankruptcy Attorney—A Good One

No, not your cousin's divorce lawyer.

You want a real-deal bankruptcy attorney who:

• Offers a free consultation (many do),

• Specializes in Chapter 7 or Chapter 13 filings,

• Doesn’t speak exclusively in Latin or sigh when you mention credit card debt.

Step 3: Take the Mandatory Credit Counseling Class

Yes, it's real. Yes, it's required.

It’s like Traffic School for Debt. Takes an hour. Costs $10–$50.

And no, you don’t get a certificate suitable for framing.

Step 4: Gather Your Financial Apocalypse

You’ll need:

• Income records (pay stubs, benefits)

• Tax returns

• A full debt list (credit cards, loans, medical bills, the guy who loaned you $500 in 2019)

• Asset inventory (what you own that has any value)

• Monthly expenses

Basically, your entire financial life in a folder. It’s like going to confession, but with spreadsheets.

Step 5: File the Petition

Your lawyer will submit the paperwork. You get:

• An automatic stay, which legally stops collections, lawsuits, and wage garnishment.

• A court date for the “341 Meeting” (aka Meeting of Creditors, aka “Awkward Money Confession Hour”).

Spoiler: Most creditors don’t even show up.

Step 6: Complete a Debtor Education Course

One more mandatory class. It’s like a breakup recovery seminar, but for your credit score. Do it or the court will not grant you a discharge. You came this far—finish the job.

Step 7: Wait for Discharge (or Stick to Your Plan)

• Chapter 7? In 3–6 months, debts vanish and you walk away lighter.

• Chapter 13? Stick to the plan for 3–5 years. Like a financial rehab program that actually works.

Until Next Time

What’s Up Next Week

You didn’t lose. You learned the system and finally used it for you.
Filing for bankruptcy is a move people make when they’re ready to stop suffering and start building. You don’t have to apologize for surviving.

Now grab your folder, your backbone, and maybe a Snickers bar. It’s time to file like a grown-up with a plan.

Coming up next week: Credit Scores Demystified: How They Work—And How to Make Them Work for You!

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Email us with any questions!

Until next time—keep more, spend less!

Jim and the Hootsquad

DISCLAIMER: None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.