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Steps to take before Bankruptcy
Before looking at Bankruptcy there are some specific steps you can take if you are in financial trouble:
Review each debt that creditors claim you owe to make certain you really owe it and that the amount is correct. If you dispute a debt, first contact the creditor directly to resolve your questions. If you still have questions about the debt, contact your state or local consumer protection office or, in cases of serious creditor abuse, your state Attorney General.
Contact your creditors to let them know you are having difficulty making your payments. Tell them why you are having trouble—perhaps it is because you recently lost your job or have unexpected medical bills. Try to work out an acceptable payment schedule with your creditors. Most are willing to work with you and will appreciate your honesty and forthrightness.
Budget your expenses. Create a spending plan that allows you to reduce your debts. Itemize your necessary expenses (such as housing and health care) and optional expenses (such as entertainment and vacation travel). Stick to the plan.
Try to reduce your expenses. Cut out any unnecessary spending such as eating out and purchasing expensive entertainment. Consider taking public transportation rather than owning a car. Clip coupons, purchase generic products at the supermarket and avoid impulse purchases. Above all, stop incurring new debt. Consider substituting a debit card for your credit cards.
Try to consolidate your debts. There are a number of ways to pay off high-interest loans, such as credit cards, by getting a refinancing or consolidation loan, such as a second mortgage.
A decision to file for bankruptcy is a serious step, which should be taken only if it is the best way to deal with financial problems.
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