Perhaps the first thing you should do if you’re facing bankruptcy is to realize that you are not alone. There are numerous reasons a person might find themselves facing bankruptcy unexpectedly. For example, one might be beset by unforeseen medical bills, the loss of employment, or have serious marital issues involving money. Sometimes years of poor financial decision making leads to the need to clear the slate and start over. Whatever the reasons, there are others in the same situation. Here are five things to consider if you’re looking at bankruptcy as a means to simplify your financial troubles.
Do Your Homework
Perhaps the first thing someone who finds themselves in financial hot water should do is to study the available bankruptcy options to determine which one suits them best. Each person’s financial situation is unique. One person might wish to file a chapter 7 bankruptcy, which is essentially a liquidation proceeding that pays off some debt and allows for a clean start. Chapter 13 is an option sometimes chosen by those with a great number of assets. It’s a good idea to make an appointment with a qualified bankruptcy lawyer to discuss your particular situation and circumstances. Be aware that debts such as student loans, alimony, child support and recent tax debt may not be eligible for bankruptcy protection.
Think of the Consequences
Something else anyone considering bankruptcy should do is to think long and hard about the consequences of this action. Filing bankruptcy is one way to discharge debts you feel you cannot pay, but it doesn’t come without distinct ramifications. Perhaps the most notable of these are the changes to one’s credit rating that will occur. The bankruptcy will show on the credit report of the individual filing it for a period of ten years, making it potentially more difficult to secure future credit, or to purchase big-ticket items such as a car or house. Consider your future aspirations as well as possible options to restructure the debts before opting for bankruptcy.
Plan for the Future
Third, get financial counseling. This tip applies to wherever you are in your financial life. Securing and following wise financial counsel helps you budget to live within your means, plan for unexpected eventualities, and make the most of your financial resources in general. It is a good idea to develop a proactive financial plan to ensure your future following bankruptcy is an upwardly mobile one. Lastly, address your besetting problems. If you work at a low paying job, plan ways to increase your income, be it asking for a raise or taking on a second job. Take inventory of your talents, hobbies, and interests and find ways to turn them into income streams.
Bankruptcy is the right choice for many people. It brings real relief from debt you’re unable to pay. Navigate the bankruptcy path with your eyes wide open and exit the experience by committing to a new path that travels in a vastly different direction from the one that led you to consider bankruptcy in the first place. Bankruptcy laws exist to protect people from the demands of creditors when they are unable to pay their debts. Take advantage of them if you must, but remain firm in your resolve to walk a different financial path in the future.