It has been reiterated again and again that because declaring bankruptcy has significant and long-ranging effects. Even if you do not want to consider the possible alternatives by financial consultancies or banks, there are still many steps you can undertake first. We have compiled a list of questions you can ask yourself. If you answer yes to any of them, bankruptcy might not be the right choice just yet.
Is there any other way to pay bills this month? Taking on a second or third job isn’t a fun way to spend your evenings and weekends. But even if it’s just for a short period, the extra income could put a real dent in your debt.
Have you set a budget for yourself? Without good budgeting, it’s hard to see where or how you can make changes that will free up your money. Consider ways to cut housing and transportation costs.
Do you assess your situation as temporary? Realistically consider whether or not your financial problems are temporary. For instance, if you’ve lost your job, do you qualify for unemployment benefits? Can you easily get another job? If you’re currently having a financial problem, but you’ve historically paid your bills on time, consider waiting a few months to see if you can improve your situation.
Is there a possibility of term-negotiation with your lenders? Many lenders will lower interest rates or adjust your payment plan if you tell them you’re considering bankruptcy. If you have student loans, you may qualify for hardship programs, deferment or forbearance on your student loans. Some mortgage lenders offer loan modification programs. If your mortgage is modified sufficiently, you may avoid bankruptcy, which is beneficial for both you and the lender.
Have you tried Credit Counseling? Consumer credit counseling is one of your best bets. An exemplary counseling service will help you re-negotiate with your lenders, which can be stressful and ineffective if you don’t handle confrontation well. They’ll also help you create a realistic budget and debt pay-down plan and advise you on whether or not to pursue bankruptcy.
Be careful who you go with, though. There are a lot of predatory companies that will take your money without actually helping you. No legitimate agency will promise to wipe out your debts or get your debts forgiven for pennies on the dollar.