Depending on your financial situation personal bankruptcy might not be the best option. Filing for personal bankruptcy should only be used as an absolute last resort. Next we’ll look at some other options to filing for personal bankruptcy that can also help save your financial future.
Let’s start with the basics: remember – don’t panic. When you’ve lost control of your finances and your bills look like an insurmountable obstacle it’s natural to panic and assume that bankruptcy is the easiest way to solve the problem. If however bankruptcy is not the best option for your situation this would affect your financial future for many years. So again, remember the first rule, don’t panic. Most people have other options besides bankruptcy if they take a moment to relax, clear their mind, and dig in.
The steps we’re about to walk through assume you have a steady income and a large amount of debt but you’re not facing a foreclosure on your home. If you’re facing foreclosure the steps you need to take are somewhat different and we’ll cover those in a future how to article.
The first step is always to establish a budget. We’ve heard this as a starting point for nearly all financial advice ever mentioned in the history of mankind, but it still remains true. This is even more important for you at this time as you probably have lost track of where any of your money is going.
It is very very very important to remember your own expenses always come before unsecured debts such as credit cards. So we will ensure that your mortgage or rent is number one, next that your utilities are taken care of, your car insurance and car payment are made so you have transportation to work, and of course make sure you have groceries in the cupboard. We’ll need to trim all of the non-essential items from your spending habits. This means you’ll be letting go of your fancy satellite TV service or cable, new clothing will have to wait and anything else you don’t need to stay alive in the immediate future will be put off till later. The next step is to place 10% of your income in your piggy bank, actually a savings account would be better, for any unforeseen emergencies. Don’t skip this step! It is important for you to pay yourself for all of your hard work.
At this point you will have a specific amount of money left over to work with at the end of the month to start chipping away at the credit card debt.
The next thing to remember is that the credit card company is not your enemy. If you call them and explain your situation you will be able to obtain their help in working out a payment plan. Creditors and bill collectors can be very stressful to deal with so remember you do not have to pick up your telephone every time it rings. Now what we’re not going to do is hide. But you can take back control of your time and energy. So what we will do is have the answering machine pick up our calls and when you hear a creditor on the line take a few moments to take a deep breath and then present to the bill collector or credit card company a payment plan. Collection agencies are sometimes quite aggressive about trying to get their money. Some bill collectors are notorious for harassment and other illegal activities to intimidate you into giving them all of your money. It’s important to remember that you have rights and that they are the ones breaking the law, not you.
If after sitting down to review your situation and the steps explained above you feel things are more serious than what we have covered so far it may be the right time for a free bankruptcy evaluation. And don’t worry, these free bankruptcy evaluation’s are a great idea no matter what your financial situation is. Sitting down with a professional to do a bankruptcy evaluation will help you determine in detail all of your available options and determine the best possible solution. After reviewing your information with someone with experience they may advise you that in fact a personal bankruptcy is the best choice. But you may surprise yourself with the options that you didn’t realize were available.
Some important things to remember about an informal bankruptcy; which is when the debtor basically stops making all payments on any outstanding debt. The assumption people make is that the black marks against their credit will disappear after the statute of limitations runs out, or in other words seven years, while the bankruptcy will stick around for as long as 10 years.
Additionally, it is important tp hire your bankruptcy lawyer like bankruptcy attorney san diego ca. You need someone who has the knowledge and expertise in dealing with the legal side of the process. Such professional will serve as your guide in dealing with bankruptcy.
There is a major problem with this type of informal bankruptcy which is you have no legal protection from your debt collectors. Your debt has not gone away it’s just not being collected. Your creditors could take you to court to file a judgment against you resulting in a lien against your house, property and other assets and even garnish your income.
Even if the state you live in has some minimal protection for your property and assets these protections go away at the time of your death and your loved ones are next in line to deal with the debt left behind.
Filing a formal personal bankruptcy of either chapter 7 or chapter 13 in a bankruptcy court legally clears you of your debt. The bill collectors and creditors no longer have any legal claim to your property, assets or your income. Although this method costs more up front you will be spared countless hours of anguish and stress and in the long run you’ll save significantly more for not having lost all of your assets and property.
