DEBT POSITION POOR

Everybody's uncle,
  I read your tough love letter to the person in financial help and was intrigued. I would love some advice if you don't mind. 
  My husband and I went through graduate school a few years back.  With this graduate degree (chiropractor), we attempted to open our own office three years ago. We never intended to use credit cards, but when we needed diapers or other necessities, we didn't think we had any options.
  Opening and owning a business meant we didn't always get a paycheck. This led to even MORE debt.  We didn't have TV.  We didn't have cell phones, we didn't spend frivolously (n my opinion).  We sold this business of ours in July, but for very little.  Then there was four months with no business at all (or income) while we waited for our realtor and contractor to come through so we could start our new office.  Now, we are living 7 hours away from our home (with my parents), and trying to sell our home. In the meantime, my husband is trying to get his office going here, is working a security job on weekends, and I am starting substitute teaching. We have five kids who luckily got things from relatives for Christmas (because we had no money for that).  My husband got a homemade coconut pie from me.  (that's all)
  We feel we're doing everything in our power, there's just not enough money to pay the bills (home that' not sold, past due bills, old office bills)
  Do we look into debt consolidation?  And if so, through whom?  Do we need to look into bankruptcy?  Home foreclosure? I have no understanding of these.
  We feel fortunate to have a home to stay in, and healthy children, we're just not sure how to handle this financial stupor.  We still have patients who owe us a good chunk of change from our last office, but have little hope of seeing any money from it.
  Any advice would be greatly appreciated.
THANK YOU,
financially desperate housewife

Dear FDH,

About the only good thing about hitting bottom is there is only one way to go – UP!

Your highest financial priority is to protect the equity in your home. If you go into foreclosure the charges that can occur make recovery a nightmare if not impossible.

Set priorities. When there is simply not enough money to go around it is important to put available funds where they will do the most good. Credit card debt or any uncollateralized debt has to take a back seat to protecting the only asset you have – that house. If there are a few dollars available for old bills and furnishings, send what you can. Many companies have a backlog of collection problems that make your obligations pale in comparison. A few bucks might keep them at bay.
Debt consolidation can be great – IF and WHEN consolidation can produce a viable payment plan AND the costs for such service are reasonable. There are horror stories concerning debt consolidation that does more harm than good. Keep in mind that “Non-Profit” does not mean “Free.” In many cases you can arrange the equivalent of debt consolidation yourself. Credit card companies and others know they can’t get blood out of a rock and will negotiate lower interest, extended payback periods, even debt reduction (caution - may have tax implication unless addressed as part of any debt forgiveness agreement). They have professionals that are well trained to resist your efforts but in the end bankruptcy can discharge debts in whole or part. I would avoid bankruptcy if at all possible but I would not hesitate to mention the possibility.

There are books available on bankruptcy and debt consolidation. The basics are not that hard to grasp and can help configure what you want to do going forward.

Obviously, generating as much income as possible will help. Not as obvious, opening an office with the same failed plan employed before might have the same result.

There are two essential elements required in any venture; a product, and essential considerations – capitalization, insurance, accounting, market analysis, location, etc. Review the mistakes you made in your previous venture and don’t make those mistakes again.

Again, there are books available. Do some reading and well-focused planning before you launch again.

If things improve by next Christmas, would you send me one of those pies?

Everybody’s Uncle