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Taking Responsibility for Your Financial Situation

Updated on March 4, 2014

For many, the idea of filing for bankruptcy seems like a nightmare. Despite its complexities and the social stigma surrounding the proceeding, bankruptcy is in many cases the only viable solution to an individual’s financial situation. The problem is that most individuals do not take the time to fully understand their own financial situations, the bankruptcy process, and the steps they need to take to protect themselves.

Learn about Bankruptcy

The first thing anyone considering bankruptcy should do is learn about the process itself. There are a myriad of guides published by the US Trustee Program that detail the proceedings in plain English. While the details are a bit confusing at times, there’s no excuse for anyone filing for bankruptcy to be completely uneducated when it comes to the way the proceedings work.

Are Other Alternatives Available?

Some people think bankruptcy is their only option when there may be other solutions available. A qualified financial advisor or lawyer should be able to help you to determine if any other option might work for you. These include determining if your case is “judgment proof” (meaning you don’t have to file for bankruptcy at all), determining if you would benefit from a debt settlement, and determining if there are other ways to negotiate your debt.

Familiarize Yourself with Your Credit Report

There are dozens of services offering free credit reports to consumers and you have the right to at least one free report each year. Everyone else is looking at your credit report, so it only makes sense that you should be watching it as well. The credit report may show you accounts you have forgotten about and/or give you contact information you have otherwise been unable to obtain. If you see mistakes, work with the credit bureau to fix them as soon as possible.

Familiarize Yourself with Your Debts

This sounds a bit silly, doesn’t it? Truth be told, most of us look at each bill individually, know we are behind on several accounts, but never everything together to form an overall picture. Make a list of every debt you owe. Having a final number may be helpful during your planning process and if you do file for bankruptcy you’ll need this information for your lawyer.

Ignore your IRA and 401(k)

As tempting as it may seem, never reach towards your IRA and 401(k) accounts when looking for a way to pay off debt. In most cases, retirement funds are protected from creditors and are exempt from bankruptcy proceedings. There’s no need for you to unnecessarily waste your money or pay early withdraw penalties.

Once you’ve familiarized yourself with your own financial situation you will be ready to find and hire a qualified bankruptcy attorney. Remember, though, that your bankruptcy attorney is filing your petition with you – he’s not doing it for you. Be open, honest, and disclose all of the information you are asked for. Doing so will ensure your petition is open and closed as quickly as possible.

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