Filing bankruptcy is a serious matter. It will affect you for at least seven years, if not longer since it does affect your credit report and credit score. It can limit the your options when it comes time to purchase a home. It is also an emotionally draining process. If you are considering bankruptcy you should carefully consider all of your options before you do this.
First, you need to make sure that you have considered all other possible options. You should start by writing down a set budget. If you are considering bankruptcy, you should cut out all unnecessary expenses. Then you should put your expenses in order of what is most important. You need to cover your food, home, and utilities. Then prioritize down the list. You then need to figure out which bills you cannot pay and total them. You may find that you are not as bad off as you thought you were.
If the amount is less than a thousand dollars a month, you can turn the situation around. Even if it is more you can still turn the situation around. You need to look at the largest debts and consider what you can do to reduce them. You may want to sell your cars and buy a cheaper car, this will reduce the payment. You may also consider selling your boat if you have one. If your house payment is more than twenty five percent of your income, then you should consider selling it, as well. Additionally, you can put your student loans on economic hardship deferment until you get some of your payments under control.
Once you have considered ways to reduce the debts, you should look at ways you can increase your income. You may work overtime, freelance or take on a second job. You can also sell items online or have a yard sale and apply that money to debt. This may get the loan amounts and your payments much lower. It is important to stay focused.
You should also set up a debt payment plan. This plan helps you to focus your efforts to pay down your debts quickly. You can set up the plan in order of smallest debt to largest, which will help you to free up money for the snowball much quicker. Another option is to order the debts from highest interest rates from highest to lowest, which will save you money on interest.
It will take a lot of self-discipline, but generally most people can avoid bankruptcy with this method. However, if you still can't get any traction after you have wholeheartedly implemented these steps you may consider it. This should be your last resort however. Remember that student loans will not be discharged during bankruptcy.
If you do decide to declare bankruptcy, you will need to contact a bankruptcy lawyer. You are also required to go through a credit counseling agency before you are eligible to qualify for the bankruptcy. Many bankruptcies will have you continue to make a set monthly payment to cover some of your debts, depending on your situation and your current income, you may not have all of your debt completely forgiven. Your bankruptcy attorney will take you through the process, which does vary from state to state.