If you are considering filing for bankruptcy, you need to make sure you think before you act. It is overwhelming to have to think about being in financial trouble, however some actions could actually make it more difficult to file bankruptcy, while others could make it possible for you to deal with your financial stressors a different way. As you weigh the pros and cons of filing for bankruptcy, keep these tidbits of advice in mind.
First, make sure that filing for bankruptcy is really the only way you can deal with your financial struggles. In general, experts recommend bankruptcy to people who can afford nothing more than the minimum payment on their debts, if that, and absolutely cannot see themselves getting out of debt within five years if they get on a budget and repayment plan. If this does not fit you, filing for bankruptcy will probably do more harm than good, because of the impact the action has on your credit rating.
Always try to negotiate with creditors before filing bankruptcy. As long as you are not severely past due on your accounts, they may be able to work with you to adjust your monthly payment amount or lower your interest rate slightly if it means keeping you as a customer or getting more of their money back. If this frees up enough cash to allow you to work your way out of debt slowly, it is a good alternative.
Second, do not start moving assets around before you file for bankruptcy. Changing the title on your car or moving money to another person’s account can be viewed as an attempt to defraud your creditors when you head to bankruptcy court. This could mean your petition to file for bankruptcy protection will be denied. If you want to try to protect assets, talk to a qualified, licensed bankruptcy attorney to find out how you can. Remember, it will be impossible to protect all of your assets when you file bankruptcy, but some are sheltered under the current bankruptcy laws.
Recent changes have been put into affect which could impact filing for bankruptcy as well. As of 2005, the law now requires that a person go though credit counseling via a government approved organization within six months before a person can file. Credit counseling organizations will help with managing money, managing debts, developing a budget in addition to providing educational materials and workshops.
Do not rush into the bankruptcy decision. Talk to an attorney, do your own research, and make sure it is the right decision for your situation. Remember, you will suffer the effects of bankruptcy for up to ten years, so it is not a decision to take lightly. There may be alternatives, and you should seek them out first. If, after seeking all alternatives, there is no way out of your financial mess, then find a qualified attorney, figure out how to best protect the assets that you can, and begin to rebuild your life.