Filing for bankruptcy is a serious decision that can blemish your credit report for up to 10 years. Before you decide to file, you should consider alternatives like debt negotiation or non-profit credit counseling. Seeking counseling from a York bankruptcy attorney is invaluable and can help you decide if bankruptcy is the right choice for you.
You should also avoid taking on new debt, such as credit card balances or mortgage payments. And you should compile financial records such as property valuations, income statements and loan balances.
1. Educate yourself.
Whether you decide to file for bankruptcy on your own or with legal help, it’s important that you educate yourself. This includes understanding the pros and cons of filing for bankruptcy, as well as typical alternatives to it.
For example, if you choose to file for Chapter 7 bankruptcy, it will stay on your credit report for 10 years (it stays on seven for Chapter 13). This can make it difficult to obtain loans or rent properties in the future.
It’s also a good idea to establish financial goals for yourself post-bankruptcy, such as saving money or working toward buying a new home. Setting these goals will help you feel more confident about your financial future. It may even motivate you to continue with responsible saving and budgeting habits.
2. Take care of yourself.
Although bankruptcy is often viewed as a mark of failure, it’s actually a tool designed to protect people from overbearing debt and malicious creditors. Bankruptcy erases unsecured credit card debt, medical bills, personal loans, overdue utilities and gym contracts.
Taking steps to re-establish credit, like setting up a budget, paying closer attention to spending habits and applying for a secured credit card can help you start on the right foot. Having support from loved ones, family and friends or a professional can also be helpful during this stressful time.
Establishing financial goals, such as a savings account and the ability to purchase a home or car in the future can help you stay motivated to maintain a budget and stick with it. It’s also important to monitor your credit report regularly to ensure discharged debt isn’t showing up inaccurately on your profile.
3. Talk to your creditors.
It’s important to understand that filing for bankruptcy is a last resort. It’s a big decision that can have significant ramifications, so you should think carefully before pushing the button. Try other options like debt negotiation, credit counseling or debt consolidation before deciding to file.
Creditors will know that you are in bankruptcy proceedings if they contact you, so it’s generally best to be upfront and honest with them from the start. Concisely portraying the financial hardship that made you unable to pay your debt can make
creditors are more sympathetic.
It’s also a good idea to avoid transferring money or property before you file. Doing so could be considered fraud and land you in jail. If you have to move money around, consider a high yield savings account that pays a higher rate of interest.
4. Seek outside help.
If you’re struggling to cope with the stress of bankruptcy, turn to others. Ask family and friends for support, and consider taking a debt management class or finding a podcast that deals with personal finance.
It’s also a good idea to consult an attorney, although you’re allowed to file without one (called filing pro se). However, research shows that those who seek legal aid have significantly higher odds of having their cases successful.
Bankruptcy can stop creditor collection efforts and even eliminate many of your debts. It cannot, however, wipe out certain kinds of debt, such as student loan debt, child support or alimony, and unpaid taxes. These debts are considered non dischargeable for public policy reasons. Still, it’s possible to get back on your feet after bankruptcy.
5. Break it down.
The best way to keep productivity high is to break down tasks into smaller parts. This can be especially helpful when you’re working on a large project that may feel overwhelming.
The decision to file for bankruptcy can be a major one, so it’s important to take your time. This will allow you to thoroughly research your options and make the most informed decision possible.
You should also consider how long it would realistically take you to pay back your debts if you didn’t file for bankruptcy. Be careful not to run up debt within 70 to 90 days of filing, because some creditors will try to object to a discharge by arguing you committed presumptive fraud. This can be costly to your credit.