Deciding to file for bankruptcy is a brave choice for those who need it, but it is certainly a commitment and can have far-reaching consequences — a Chapter 7 bankruptcy stays on your credit report for 10 years after it’s arranged, which can affect your ability to take out a loan or mortgage. The process takes about six months to complete, and you are still responsible for paying off many of your loans, albeit in a more reasonable time frame. But, bankruptcies have proven to be very effective in helping people restructure their debts and mindsets about money. There were 1,071,932 bankruptcy filings in the U.S. during 2013. Remember — you cannot go through the process alone, and will need a fair amount of bankruptcy help.
Filing is still a big decision, so a thorough self-audit should be conducted before you make a final decision, and you should, of course, consult a bankruptcy attorney when assessing your overall financial situation.
1. See if You Can Take Action on Your Own
Start by trying not to file bankruptcy — call your creditors and see if you can work out different repayment arrangements with them yourself. Put yourself on a strict budget, and arrange for part of your income to go directly towards repaying your debts. Some creditors will allow you to change repayment plans if you present a comprehensive plan for repaying your debt.
2. Assess Your Debt
Before you go ahead with your plans for filing bankruptcy, take a serious look at your debt and do some analyzing. Some types of debt don’t get erased with bankruptcy, like student loans for example. That’s why it’s important to find out exactly how much you owe and where. Also, anyone connected with your loans won’t be forgiven — for instance, if your parent co-signed a car loan with you, you’d still have to repay the loan yourself.
3. Learn About the Different Types of Bankruptcy
If you really have determined that you want to file bankruptcy, and it’s the right solution for your particular financial situation, make sure to do your research before you start working with your bankruptcy lawyer. There are several types of bankruptcy and all are designed to help people in different types of financial situations.
Whatever you do, make sure to reach out and take what bankruptcy help you can.