Bankruptcy is a process to follow when everything else has failed.

Review the mathematical ability to pay expenses before declaring bankruptcy.
Compare your income versus expenses and decide if you can reduce your expenses or increase your income. Refer to the article “Planning a Monthly Budget” and try to find a new fiscal situation that will work.

Examine your real property and other hard assets to determine what might be sold and what you might lose in a bankruptcy.

OPTIONS TO EXPLORE

• Examine your lifestyle to determine if expenses can be reduced.
• Seek credit counseling. Free initial consultation is available from Bankruptcy Attorneys.
• Talk to creditors. Many businesses have in-house programs that deal with financial hardships. Such programs reduce a monthly payment in exchange for committing to a longer payback period. Creditors are more likely to work out a payment plan if they see you have exhibited good faith in trying to solve your problems.
• Debt Consolidation/Debt Settlement Programs exist which settle balances on credit card and non secured personal debt for 30 to 50 cents on the dollar. The enactment of this program is similar to bankruptcy.
  

DEBT CONSOLIDATION

Most people in debt owe unsecured debt such as credit card bills. A debt consolidation plan is basically a second mortgage. It uses your home as collateral, which puts your home at risk if financial problems continue.

REASONS NOT TO DECLARE BANKRUPTCY

• Laws vary from state to state. Some states require you lose the equity in your home and other assets. Some states allow you to keep property.
• A bankruptcy will be on your financial record for 10 years. If you can get credit, the interest rates can be as high as 18 to 20 percent or more.

CREDIT COUNSELING SERVICES

Be aware of potential costs. “Non-profit credit counseling services” does not mean the service is government sponsored. Many non–profit credit counseling services receive money from the creditors and use this money to pay the salaries of owners and directors. The primary goal is to arrange payment schedules, which are in the interest of the creditors. They are non-profit, but the goal of the service provider is to make money for salaries. Be wary of any agency requiring more than a $35 fee to start a debt management plan. Any monthly charges should be in the same range.

To find a reputable Credit Counseling Service

Go to a search engine (http://www.google.com/ or http://www.yahoo.com/) and type in key words.
Examples:

• The key words state of Georgia credit counseling takes you to a site that discusses a credit counseling service available in the Atlanta area. The service is a member of the Better Business Bureau, a part of the United Way, and is funded by grants as well as by creditors and client contributions.
• The key words state of Texas credit counseling takes you to a site of the Texas Attorney General. This site provides links to accredited community service agencies.

REMINDERS

• Creditors are more likely to work out a payment plan if they see you have exhibited good faith in trying to solve your problems.
• Do away with credit cards. Credit cards encourage impulse buying. Concentrate on purchasing the necessities.
• Check the Better Business Bureau, www.bbb.org/BBBcomplaints, to make sure that any company or service does not have complaints on file.

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