Debt Free For Life: David Bach on Bankruptcy

A publicist for David Bach reached out to me last month to ask if I would be interested in reviewing his new book: Debt Free For Life. Usually, I pass. Reading a book and writing a quality review takes a dozens of hours for me. This request was different for a couple of reasons. One, it’s David Bach, one of the best known personal finance authors. The other was the request itself. It wasn’t to review the whole book – just one chapter.

The publicist clinched the deal when she mentioned that the chapter would be about bankruptcy. That’s one area of personal finance that I never write about here on Lazy Man and Money. The idea is keep yourself out of situations where the b-word is mentioned. Still, for the purposes of being complete, it is something that should be covered. At the risk of angering PETA, this kills two birds with one stone, metaphorically one of my favorite things to do.

The chapter on bankruptcy was a little dry – which is to be expected. A chapter on bankruptcy isn’t going to compete with Dancing With the Stars (unless you are dork like me). I don’t know about you, but if I was facing bankruptcy, I’d put a high value on the information being valuable, not the entertainment value of the information. Here are a few of the points that David Bach covers:

• The best advice he has to those who may be considering bankruptcy – Here’s a hint, seek professional advice early – do not wait. (He couldn’t emphasize the importance of this more.)
• The two chapters of bankruptcy applicable to individuals – Chapter 7 and Chapter 13 – Most people identify bankruptcy with Chapter 7, a total declaration of being unable to repay. Fewer people know about Chapter 13, which allows for a more flexible repayment schedule.
• The factors to look at before applying for bankruptcy protection – Such factors include: how much you owe, your income, the types of debt, the assets you own, and what your future plans are for the next 5 years.

Much of the chapter focuses on the final point. However, I learned some really interesting things about bankruptcy such as how you can keep your multi-million dollar home in Florida and Texas. Just make sure you live there 3.5 years before you declare and make sure you talk to a lawyer. Perhaps a more relevant tip is that retirement accounts can be protected. This is no only yet another reason to max out your retirement contributions, but also a warning not to tap that money to pay down credit cards.

Finally, the chapter ends with Bach making some very important points. Briefly paraphrased, filing for bankruptcy doesn’t make you a bad person. It can cause depression and it may be wise to seek council beyond a financial and legal. He makes a great point that bankruptcy is temporary and that it too will pass.