If you currently feel like you’re buried in debt, and you think bankruptcy might be the answer for you, don’t make that decision just yet. There might be other options available. No matter what you finally decide, evaluate these 6 Steps You Should Take Before Filing Bankruptcy.
1. Make a List of All Your Debts
First, look at all your secured debts like your mortgage and car loan. How much are your monthly payments? What are the interest rates?
Then, make a list of all your fixed expenses like electricity, phone, insurance, etc. What are the total costs for these expenses?
Follow those up by taking a serious look at your credit card debts. Take out all your credit card statements and write down the amount you owe for each card and their corresponding interest rates.
Finally, write down all your other expenses; these include your optional expenses like entertainment, gym, membership, dinners at restaurant and other impulsive purchase.
2. Eliminate the unnecessary expenses
As a woman who loves accessories (shoes and handbags in particular), this was difficult for me.
Make a diet plan for your cash; In this plan, you’re going to write down all your savings from the elimination of your optional expenses. You will be surprised at how much money you can save by carefully controlling your expenses.
The money you saved can be used to pay down your debts.
3. Get your family involved and work as a team
The third option in the 6 Steps You Should Take Before Filing Bankruptcy, is to get your family involved.
If you have a family (meaning, people who’re related to you who live in the same house), get them together and let them know that you’re working through your finances and have them work together help control household spending, and put the brakes on unnecessary expenses.
4. Cash Out Your Assets
If you have equity in your home, you’re in a better situation because you can refinance, or get a secured loan to pay off your debts. But be careful how you spend that money once the refinance comes through. It’s SO EASY to spend just a ‘little extra’ here, and a ‘little extra’ there, but don’t do it. I promise you’ll regret it sooner rather than later.
If on the other hand, you’re looking at bankruptcy as a debt relief option, your may not have equity to lean on.
Equity is not the only asset; lots of people tend to forget that some things that have cash value, but not sentimental value. Think antiques, old clothes or collectibles.
Write down all the assets you own that you can sell. Check your closets, garage, storage locker, and crawl space. Look for things that you can live without. Then, get them ready to sell in garage sales, eBay or consignment shops. Use as much of the money as possible to pay down your debts.
5. Go for Consumer Credit Counseling
The fifth option in 6 Steps You Should Take Before Filing Bankruptcy, is to get credit counseling.
Make an appointment with a credit counseling agency and let the counselor know your financial situation. That counselor can also help you draft a budget, if you haven’t already. The counselor will also propose a debt management plan for you moving forward.
Review the debt management plan proposed to you before your sign to enroll in it.
You might get a few plans from other credit counseling agencies for comparison. Choose the one that best suits your current financial needs.
Even though a debt-management plan can have a negative impact on your credit, it’s better than bankruptcy.
6. Get a Second or Part Time Job
And last but not least of our 6 Steps You Should Take Before Filing Bankruptcy, is to get a part time job.
Even though you won’t make a fortune in a part time job, a little extra money coming in can keep a bad financial situation from getting worse.
You might think that bankruptcy can be your easy way out from under those debts that you feel are choking you right now, but a bankruptcy can follow you for 7 to 10 years.
Always do your research and look for other alternatives before making bankruptcy your first choice.