Bankruptcy isn’t for everyone and you shouldn’t file only because you’re in debt right now. Bankruptcy should be your last resort and a decision you’ve made only after all other options have been exhausted.
Take a good look at the debt you’ve accrued and decide if it’s something you can dig yourself out of on your own or if it’s permanent. If you’re so far in over your head that it’s not feasible that you’ll ever be able to pay it off, then bankruptcy might be for you. But, if you can determine that your debt is only temporary, devise a financial plan on how to lower it.
One of the most overlooked alternatives to filing bankruptcy is contacting creditors to see if they will work with you. Generally, people look at creditors as money hungry monsters that will stop at nothing (aside from murder) to get the debt that is owed to them. What we all need to remember is that they are people too and they often will work with you rather than have you file bankruptcy. Write them a letter or call and ask them if they will consider lowering your payments, letting you skip a payment or change your due debt. Remember that you can always send a lower amount than your minimum payment if absolutely necessary. This is much smarter than skipping a payment altogether.
Research different debt counseling companies in your area and find a legit one that can help you dig yourself out of debt. You will eventually have to do this anyway if you file bankruptcy (thanks to the new bankruptcy law) so, you might as well give it a try when it can still benefit you.
Last but not least, don’t get overwhelmed. It’s best to work on paying off one debt at a time. Pick your highest debt and pay that one off first and then work on your smaller ones. By doing this, you will feel like you’re actually getting closer to lowering your debt then you would otherwise.
Previous: Bankruptcy Risk Score
Next: Chapter 7 or 13? Which One is Right for You?
