Struggling to pay your bills each month and falling further and further behind is not a good place to be. Unfortunately, getting out of debt is not an easy task. If you are considering filing bankruptcy for debt-relief, here are three steps you might want to take before making your decision.
1. Scrutinize You Budget
Bankruptcy is helpful in many ways, but it is not free of consequences. Because of this, you should look at all other options before you decide to use bankruptcy for debt-relief, and a good place to start is with your budget.
You should make a list of all the debts you owe, including the total balances owed and the minimum payments. You should then compare this list to your income. Is there any way you could earn some extra cash to pay off the debts, or is there a way to cut some of your spending habits to free up cash for your debts?
If you can cut back on your spending and increase your income, you might find a way to repay the debts without any type of help. If you do this and still cannot see a way to repay your debts, you could start looking at alternative methods.
2. Look at Alternative Methods
Alternatives to bankruptcy include debt consolidation, debt settlements and credit counseling services. These options often help people get rid of debt over time without filing for bankruptcy. However, these options do not suit every situation. Here is a breakdown of what each option involves:
- Debt consolidation. If your credit is good enough to qualify for a loan, you could pay off all your debts with the loan proceeds. This could result in having only one payment, and the payment might be a lot lower than the total you are currently paying.
- Debt settlement. A debt settlement involves working out deals with your creditors that allow you to pay less than what you owe.
- Credit counseling. This is a form of debt consolidation. Essentially, it involves hiring a company to help you work out a repayment plan for your debts.
Evaluating these options could help you find a different way to get out of debt, and these methods may have fewer consequences than bankruptcy.
3. Full Understand the Consequences and Rewards of Bankruptcy
If you cannot find a different option, you should fully evaluate the bankruptcy process so you can see exactly what you will gain from it and the consequences it comes with. The main benefit Chapter 7 bankruptcy offers is forgiveness of unsecured debt. This comes in handy for people who owe a lot of money to credit card companies.
Bankruptcy offers other benefits as well, but one of the top consequences is the effects it has on your credit. After filing for Chapter 7 bankruptcy, it will remain on your credit report for the next 10 years, and there is nothing you can do about this. This filing can impede your ability to take out future lines of credit and loans.
Fully analyzing the rewards and consequences is vital when making this decision. If the rewards outweigh the consequences and you cannot find another way out of your debt issues, filing bankruptcy might be the best option you have for your situation.
If you need help managing your debt or getting rid of it, contact Melder & Melder, P.C. We can help you find a way out of debt, and we can give you advice for your own unique situation. Contact us today to learn more about our practice areas or to schedule a consultation with a qualified bankruptcy attorney.