Things to Do Before Filing Bankruptcy

Many years ago my husband and I had many things happen that caused us to feel like we had to file bankruptcy. That was a very hard decision, but we didn't feel we had a choice. Between several health situations and huge medical debt, as well as a home we couldn't afford that was falling apart, we were in a hole. With two small children, we could not see how things could be worse. We finally filed for bankruptcy after months of collectors calls and tears. Looking back, there are things we should have done before making that decision.

The first thing you need to do is STOP using credit. Even if you end up filing bankruptcy, using credit cards within a certain time period of filing will destroy your chances of having your debt erased. It is considered fraud to charge your credit cards when you know that you can not pay it back. Take a second job if you need to feed your family. Seek assistance for food if you qualify from the government if it will help. But, be frugal and avoid spending more than truly necessary.

The next step is to contact all creditors and let them know you are having problems. Some will suggest ways to help and IF they really are intended to help you, take advantage. Just be wary of what you are agreeing to, as some credit companies are sneaky! Contact with each creditor if vital to help them realize that you intend to pay, you just need time. Ignoring them actually causes more problems. You should not have to make contact more than once a week or less.

One thing to consider when you find yourself considering bankruptcy are your vehicles. If you have more cars than you truly need, consider selling the extras. Can you carpool, take a bus, or arrange schedules so that 1 car can be used for your family? Even if you have to take hit because you owe more than a car is worth, it's better than having a car you can't afford. Besides, if you file chapter 7, you are only allowed so much anyway. That debt will be reinstated so you will have to pay for it, so if you don't need it, get rid of it. It is also really bad for your credit if you have a car repossessed. Take out a small loan if you have to to pay the difference on the vehicle loan. A smaller loan is easier to pay than a large one.

Scour your home and storage to sell every item you don't use or need. Don't fall into the trap that this is free money. It's not! This money needs to be used to pay debt. Pay your most important debt first. Your mortgage or rent needs to be paid before everything else. Although if you can move to somewhere cheaper, that is highly suggested. Utilities are also more important than other things. Next would be your vehicle, then other debts. Credit cards are the last things that should be paid.

Getting a second job, or sided jobs is a great way to earn extra money to pay your debt. It's not easy, especially if you have a family since this means spending more time aways from them. But every dime counts in this process. Depending on the project you might even be able to include your family. Try various things such as pizza delivery, waiter, pooper scooper (did you know you can charge $10 a yard?) landscaper, painter, computer technician, etc. Look around at the needs in your area and advertise your service. You may end up making scads more than you need. Just be persistent and intense in your efforts.

For medical debt, contact the hospital financial office. They may offer programs that help those in need. Some programs I have head of include low payments options and a sliding fee scale based on income. You won't find out about available programs if you don't ask! Reducing your bills is worth the effort you put into calling all creditors about your trials.

Filing bankruptcy is a big decision. It effects your future loans, employment, and homes. If we take out a loan, we have a large interest rate, making our payments much higher than they should be. Some employers will not hire those with bad credit histories for various reasons. Buying a home, while possible is very costly. You may be required to put down a large sum for a down payment, or you won't be able to get a home for your needs or wants because your approval amount is too low. Closing costs can also be larger as some brokers charge more since approving bad credit risks is a challenge.

Anyway you look at it, bankruptcy is a last resort. If you have changed your lifestyle and tried everything possible to pay your debt and it's just not possible, then you can file bankruptcy knowing you did everything you could to avoid it. That is the reason bankruptcy exists, for people willing to try. I regret not trying harder. It costs me too much money to have filed bankruptcy. We have changed our lifestyle, so this will not happen to us again, but I am glad that the option is there just in case. But I know I would try everything in my power to avoid it.