Tips On How To Avoid Bankruptcy


When you are in the unfortunate position of having way too much month left at the end of the money, most consumers start to think in terms of bankruptcy. Based on common wisdom, many people assume that bankruptcy is their only alternative and that is will just very simply eliminate their bills so they can start over.

This is very inaccurate, especially the "simple" part. Bankruptcy is far from simple. Yes there are various kinds of "do it yourself" kits on the market that allegedly show you how to file bankruptcy from the comfort of your kitchen table, but what they don't tell you is that you don't know how to file properly to retain as much of your assets as you potentially could, and that you may not even be approved to file.

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Yes you read that right - with the recent major changes in bankruptcy law, you now need to be approved to file, it is no longer an automatic thing as it was only a few short years ago. There are now many more restrictions on when you can file bankruptcy and even IF you can file. One of the reasons that it takes so long is that each case is evaluated individually, since everyone has a very unique situation.

It is interesting to note that studies have shown that the vast majority of people who do file do NOT do so out of financial mismanagement issues. Sure there are some of those, inevitably, but the majority of people who file do so because of a drastic change in their financial circumstances such as a job layoff, a very messy divorce, unexpected high medical bills, and various other things that can rarely be predicted and planned for.

If you are thinking about bankruptcy, back up and take stock of where you are right now. Bankruptcy MAY be your best option but it is not always your best option and is almost certainly not your only alternative. Be aware that bankruptcy has some long term negative aspects which should be avoided if at all possible, like the fact that a bankruptcy will be a huge red flag on your credit report for the next 7 to 10 years.

Get copies of your credit report and find out what the credit bureaus think of you. Studies have shown that a majority of consumer credit reports have errors in them, and these errors will never be corrected unless you take the time and effort to point out the error to the agencies. This step in itself could raise your credit score and make you eligible for much more attractive interest rates on loans and refinancing options.

You may want to consider debt consolidation. This is where you turn over your bills to a debt consolidation agency who will negotiate with your creditors to waive late fees and lower your interest rates. For example, if you were paying out $3000 per month before, you could find that you are now only paying $1500 per month with the help of a debt consolidation company. Be aware this is not a loan, so you need to keep up with your payments to the agency.

Meet with a good bankruptcy attorney to discuss your situation. If you move forward with a bankruptcy filing, chances are excellent that you will save much more than the attorney's fees in terms of what you will save overall. These are people who understand the law and can recommend your best course of action based on your financial circumstances.

Don't be in a hurry to file bankruptcy. You will be much further ahead to thoroughly examine all your options and alternatives, especially for something like bankruptcy which is going to remain with you for many years into the future.


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