Evaluate Your Financial Situation Thoroughly
Before you rush into bankruptcy, take time to thoroughly evaluate your financial situation. This step can help you really grasp the financial state you are in, and it might help you find a solution of your own.
To do this, write down your monthly income and monthly expenses. Compare these amounts to see if you have enough money to pay your monthly bills. Next, write a list of all debts you have with the amounts you owe. Carefully look at this information to see if you could somehow work out a budget to repay your debts without filing for bankruptcy.
Analyze Alternatives to Bankruptcy
The next step you should take before filing bankruptcy is to analyze alternative options to bankruptcy. You can do this by researching the options online or by talking to a bankruptcy lawyer or debt-relief agency.
One alternative to evaluate is debt consolidation. This program is helpful for people with a lot of credit card bills, but it might not help a person who owes IRS debts and past-due child support payments.
Another option is debt settlement. With this option, you work with a company who helps you settle your debts with all your creditors. This option also works well for people who owe money on a lot of credit cards, but it might not help you in other situations.
Examine the Types of Bankruptcy Options and the Ramifications
If you cannot find an alternative option to bankruptcy, your next step involves examining the types of bankruptcy options available as well as the ramifications of filing. Chapter 7 and Chapter 13 are both common types consumers use for debt-relief purposes, and both have pros and cons.
One benefit of Chapter 7 is the ability to receive debt forgiveness, which means the bankruptcy wipes away certain debts you owe. One benefit of Chapter 13 is the ability to keep your home and car and have time to catch up on debts you owe.
You may not know which type you would qualify for and which is better for your situation without talking to a lawyer, but you can still research the types to gain a better understanding of each.
Both options have consequences, though. One of the main consequences of bankruptcy is the way it affects your credit. The filing will remain on your credit report for 7 to 10 years, depending on which type you use.
Complete a Credit Counseling Course
One other step you will have to take before you file for bankruptcy involves taking a credit counseling course. This is a requirement for anyone who files for any branch of bankruptcy, and your lawyer will tell you how, where, and when to take this.
Credit counseling teaches people a lot of different things related to budgeting, finances, and credit. While it is something people take because it is required, you may actually enjoy the class and learn a lot from it.
For example, you will learn how to create a good budget. You will also learn how to manage credit lines and ways to reduce monthly expenses.
After taking the steps listed here, you might have questions about bankruptcy. If so, contact C. Taylor Crockett, P.C. We offer bankruptcy assistance, and we can evaluate your case for free. Call us today to schedule an appointment to discuss your case.