6 Steps to Take before Bankruptcy
If you currently have unbearable debts and are thinking "I can wipe my statement and credit report by declaring bankruptcy," sleep on that thought for a while, as there may be other options available. Try to improve your situation before you investigate the bankruptcy option. No matter which way you go, evaluate the 6 steps listed below to see if you could avoid filing bankruptcy.
1. Detail out all your debts
First, look at all your secured debts such as your home mortgage and car loan(s). How much are the repayment for each month? What are the interest rates?
Then, list down all the fixed expenses such as power, phone, insurance, food, etc. What are the total costs for these expenses?
Continue this process by examining your credit card debts. Take out all your credit card statements and write down the amount you owe for each card and their interest rate.
Finally, write down all your other expendable debts; these are your optional expenses such as entertainment, gym, membership, dinners at restaurants and other impulsive purchase.
2. Eliminate the unnecessary expenses
Now you should have a better idea on where your money goes. Make a diet plan for your cash; In your Cash Diet Plan, list down all the your savings from the elimination of the optional expenses. You will be surprised at how much money you can save by carefully controlling your expenses. The money you saved can be used to pay down your debts.
3. Get your family involve and work as a team
Try not to do it alone because under such stress, you may not be able plan with clear mind and may feel out of control; get your family together and let them know your financial problem and have them to work together to control the household spending and eliminate the unnecessary expenses.
4. Cash out with your assets
If you have equity, you are in a better situation because you could refinance or get a secured loan for pay off your debts. If you are already looking for bankruptcy as your debt relief options, you may not have any equity. But equity is not the only asset; many people tend to forget that things that have cash value, but not sentimental value. Think antiques, old clothes or collectibles.
List down all the assets you own which your can sell and cash them out. Check the closets, garage and storage locker, and find out what you can live without. Then, cash them out through garage sales, eBay or consignment shops. Use the money to pay down your debts as much as possible.
5. Go for consumer counseling service
Arrange an appointment with a credit counseling agency and let the counselor understand your financal situation and draft a budget for you. Review the debt management plan proposed to you before your sign to enroll into the plan. You may get a few plans from other credit counseling agencies for comparison. Choose the one which best suit your current financial needs. Although a debt-management plan can have a negative impact on your credit, it's better than bankruptcy.
6. Get A second or part time job
Utilize your out-of-work time on second or part time job. Although you may not earn much in your part time job, a little money coming in can keep a bad financial situation from getting worse.
Bankruptcy may be your easy way out from debts but the consequences may follow you for 7 to 10 years. Always look for other alternative before choose for this dramatic options.
If you have already tried these strategies and would like more information regarding bankruptcy, please contact the attorneys at Wessler Bankruptcy Law Firm today.
If you’d like to learn more: call us to speak directly with an attorney for a free, no obligation, consultation to see if you qualify for bankruptcy and if it is the right decision for you and your family or your business.
Disclaimer: This article is meant for reference only, and is not intended to be legal advice.
For legal counsel regarding your situation, please consult an attorney licensed in your state.