Should Your Try to Avoid Bankruptcy? |
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Bankruptcy is often last resort for many people. Many of these people are so far into debt that the light at the end of the tunnel can seem very dim. When you find yourself in this predicament you have to decide between 2 fates: filing bankruptcy or slowly digging yourself out of debt to avoid bankruptcy. There are pros and cons to both sides of the issue and you should explore all the possibilities and consequences before you make a decision. Is Bankruptcy More Helpful or Hurtful? There is no doubt that bankruptcy can be more helpful because it will give you an immediate clean slate to work with and allow you to be debt-free. However, trying to avoid bankruptcy is often ones first response. This is because bankruptcy and the accounts associated with it will often stay on your credit report for several years. Furthermore, some people even feel like failures or deadbeats because they lost control of their financial situation and were unable to pay their bills. These people want to know that they did everything in their power to try and avoid bankruptcy before throwing in the towel. The truth of the matter is that it can take years upon years to pay off your debt and, even after you do, those accounts may continue to haunt you when you try to reestablish your credit history. Often times, it is easier to get new credit from creditors after a bankruptcy, rather than having several unpaid collection or charge-off accounts. Therefore, filing bankruptcy may help you rebuild your credit quicker. On the other hand, there are some creditors who will never allow you to get credit while there is a bankruptcy listed on your credit report and others will blacklist you for life if you have one of their accounts included in your bankruptcy. Steps to Avoid Bankruptcy Should you decide to try and avoid bankruptcy, there are particular steps that you need to take. 1. Find a solution to the problem that got you into debt in the first place. If it is because of a lay-off, make sure you have a new job -- otherwise you may not have the financial means to avoid bankruptcy. If it is because of spending habits, make sure you have those under control and have taken classes to learn how to make a budget and live within your means. Otherwise you will likely find yourself in this situation again and not able to file bankruptcy. 2. Kick all non-necessities to the curb. This includes cable TV, cell phones (unless it is only one that you use as a home phone), and eating out. 3. Gather your bills and figure out how much of your income goes out for current expenses. Also figure in a reasonable amount of money for groceries and gas. 4. Deduct your monthly expenses from your monthly income. This is how much money you have left each month to put toward your debt. 5. Call each creditor and sit up a reasonable payment plan based on how much you are able to pay each month. You will need to determine how much should go to each creditor, so that all creditors are paid monthly. From here it is just a matter of watching your debt dwindle. Although you may want to avoid bankruptcy, you need to be reasonable about it. If you don't have much money left over after your current bills are paid, then bankruptcy may be the right decision for you. Remember, choosing to avoid bankruptcy, or not, is a personal decision, one that only you can make. |
