Top 10 Steps to Take Before Filling for Bankruptcy
There are two benefits here. First, you should pursue any avenue available to you which might solve your financial stresses before filing for bankruptcy. Second, if you are approved for bankruptcy, credit counseling from an approved agency is a requirement of the bankruptcy process.
With the help from credit counseling, rework your budget and cut some corners to see if you can free up money to apply to your debts. There may not be much you can do, but anything can help and other steps may free up enough time to allow you to pay down some of your biggest debts.
If you have equity in your home, you may be able to borrow enough against your home to pay off the debts that are putting you behind and at risk of bankruptcy. However, this can be a dangerous solution if you are not able to pay the monthly cost of the debt consolidation loan. If you can, this is a great alternative to bankruptcy and makes your life that much easier now that you have a single payment a month for everything you owe.
The credit counseling session should help you decide whether debt management can help you with your financial situation. This involves working with a non-profit company that mostly negotiates lower interest rates with your creditors. The leverage is that the unsecured creditors could end up with nothing if you file bankruptcy. The benefit is that you lower what you owe and manage all your debt in a single payment to the debt management company. The negative is that your credit will be negatively impacted.
Debt settlement is a step beyond debt management. A company negotiates with your debtors and primarily looks to slash the amounts you owe, relying on the leverage of a potential bankruptcy. Remember that any balances reduced must be reported as income at tax time. Many experts recommend bankruptcy before debt settlement.
If you think you know someone with enough money who can help you out of your financial rut, approach them for a loan. Of course, this must be someone you know well because you won't be able to afford to pay off the loan very quickly. Be sure, however, to treat the loan seriously and reduce your terms to writing to protect you and your friend or loved one. In fact, if youbknow them well, they may want little to no interest on the loan.
If you are on the brink of bankruptcy, it may be time to consider selling off valuables that can give you the cash to get out of your financial mess. Bankruptcy is the most serious negative mark you can get on your credit report and it takes serious work to recover from bankruptcy. Selling a piece of property or other valuable might be hard for you to consider, but you have to weigh the alternatives. This could be a simple way of getting back on track.
The whole idea is to get more money into your monthly budget. There are also many jobs that can be done at home that are available on the Internet. Make sure, however, to avoid any scams. Remember that the longer you hold off bankruptcy the more time you have to work on your debt.
If you have created some additional time by selling assets or getting a second job, it's vital to make the best use of that time. Take a look at the two or three debts that are the worst offenders. Figure out how much extra you must pay to eliminate that debt in a year or two-year period. Sites like www.bankrate.com offer calculators that can help you out.
Find an attorney who is recommended and ask for an initial consultation. Often, these are free. Bankruptcy attorneys can not only help you file for bankruptcy, but they can offer advice on whether you can avoid bankruptcy. It's important to talk to someone who is intimately familiar with the bankruptcy process to offer some advice on your situation.