Northwest airlines emerged from bankruptcy protection yesterday as a leaner company which is better able to compete in a tough industry. What can we learn from Northwest Airlines? We know that businesses use Chapter 11 all the time to dig out of bad business deals. How does this compare to consumers? If you think about it, businesses use the bankruptcy process as financial planning. Northwest was able to shed debt, get rid of unprofitable ventures and come out streamlined. Actually, Northwest is now in a much better position to compete with other airlines becuase the other airlines may be carrying the weight that Northwest was able to shed.
Consumers can do the same thing. If you stop to think about the future. Where will you be in 5 years, 10 years, 15 years or even 20 years? What will your assets be like? Will you still have debts? Will you own your home? Will your car be paid off? Will you ever be able to retire? Believe it or not, this is a conversation that I have with my clients when we meet. I ask them where they want to be, and then I ask if they have a plan that will take them there. When a business files bankruptcy they have a plan in place, they have an exit strategy and they also have a very good idea of how the bankruptcy will change their future. Consumers should do the same thing.
Bankruptcy can be used as financial planning. Individuals sometimes think that I am crazy when they came to see me for debt relief and I discuss financial planning. As the conversation continues they discover that bankruptcy can be a way for them to start dreaming real dreams, setting financial goals and living their lives.
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