What to Do Before Filing for Bankruptcy
There is a lot of misinformation out there that leads people to believe that bankruptcy is the best – or only – option when it comes to resolving financial disaster.
And in some cases it is. But it is important to always do your homework before making any major financial decision.
While bankruptcy can relieve you of unsecured debts, stop foreclosure proceedings, and put a halt to debt collection activity, it does come at steep price. So if you are contemplating filing for bankruptcy, you may want to consider these steps before filing.
1. Do Your Homework
If you are considering filing for bankruptcy, then you want to make sure you do your research. You should read as much as possible so you understand the pros and cons of bankruptcy, and whether any alternative solutions may be a better fit for your case. There may be a debt solutions program out there that can help you get out of debt faster and do less damage to your credit. If you do decide to proceed with filing for bankruptcy, you’ll want to make sure you know about all the consequences of bankruptcy once you have filed. How long will it be on your credit report? Will your employer(s) know? How will it affect your ability to get a credit card? You should know the answers to all of these questions before you choose to file.
2. Reevaluate Your Budget and Finances
Once you have a better understanding of bankruptcy and what’s involved, it is important to reassess your budget and finances. Are you following a strict budget? You’ll want to consider whether cutting back on non-essential expenses and following a strict budget can help you avoid bankruptcy by allowing you to slowly pay off your debts. Our firm generally advises that bankruptcy be considered as a last resort when you can no longer afford basic necessities.
3. Get a Free Copy of Your Credit Report
No matter the state of your finances, it is essential to check your credit reports on a regular basis. You can obtain all 3 credit reports (Experian, TransUnion, & Equifax) free of charge, once a year. Your credit reports matter and it is important to thoroughly check them often. Reviewing your credit reports regularly will help you stay on top of your finances and catch signs of identity theft.
4. Devise a Battle Plan
Attack your finances head on and to the best of your ability before choosing bankruptcy. Consider focusing on the highest interest rate debts and making frequent payments. Cut out excess expenses such as gym memberships, negotiate your cable and phone bills – do whatever you can to save extra cash. If that means getting a side-hustle to help pay down your debt, then so be it. Go through each category of your expenses and work to pay them down. You may even want to consider tapping into your emergency fund to help get you started.
5. Schedule a Consultation with an Attorney
Before making a final decision, you may want to speak with an attorney. Most debt relief and bankruptcy attorneys have free, no-obligation phone consultations. Consider giving them a call and explaining your situation. When choosing an attorney, get a referral from a family member or friend who has worked with one in the past or look for an established firm that specializes in debt resolution and has positive customer reviews.
Bankruptcy should always be seen as a last resort in solving financial problems. Filing for bankruptcy is more of a drastic choice than many people realize and there are alternatives that create a much stronger financial foundation. If at any time you wish to learn more about the pros and cons of declaring bankruptcy and whether you are eligible for alternative solutions, we can schedule for you (at no cost) a consultation with an attorney in our firm.
It is important to consider all possible options before filing for bankruptcy. Try your best to first improve your situation, speak to a professional and attack your debt. Are you considering bankruptcy? Have you acted quickly? What steps have you taken to pay down your debt? Comment below!