Many Americans are struggling their way through the difficult challenges presented by the current state of our economy. And, it may be several years before we even begin to see recovery, let alone a strong one.
Unfortunately, no matter how hard people try, some will face the difficult reality of bankruptcy. Before seeking the help of a debt advisor or an expensive attorney, there are some things you can do before officially filing for bankruptcy.
Here are some steps you might take that could help you avoid bankruptcy:
- Make a list of all your current sources of income and expenses. Since you’re facing bankruptcy, now more than ever before you have to know what you have and where it’s going.You’ll also have to begin prioritizing what’s most important in your life. Focus your spending on the bare essentials because money will be tight until you can get back on your feet.
- Make a list of each creditor to whom you owe money, including their name, the amount you owe, and the interest rate they’re charging. Contact each creditor and speak with the supervisor because most often, front-line employees don’t have the authority to work out a more affordable repayment method with you.If you’re not comfortable doing this on your own, there are many non-profit credit-counseling agencies willing to help that charge low fees or none at all.
Very often, bankruptcy becomes completely unavoidable. You may have been doing your best to be responsible, but sometimes your financial circumstances are beyond your control. Perhaps you were laid off and have a Utah mortgage that is beyond your ability to pay.
Before you actually begin the bankruptcy process, however, keep in mind bankruptcy only eliminates certain kinds of debt and debt-related problems. Here are some problems bankruptcy eliminates:
- Credit card and other unsecured debt.“Unsecured” simply means the creditor has no lien on your property and has no right to repossess any of it if you fail to pay your debt.If you file for Chapter 13 Bankruptcy instead of Chapter 7, you may be legally required to pay back some of your unsecured debt.
- Creditor and collections harassment.Bankruptcy is particularly helpful if Utah mortgage companies have begun the foreclosure process, or if your car is about to be repossessed.If you’re facing less serious collection activities such as phone calls and letters, all you have to do is provide written warning, and they are legally obligated to stop.
- Some types of liens. Liens are the creditor’s right to take your property. Liens can survive the bankruptcy process, unless special procedures are applied.
What Bankruptcy Won’t Do
While bankruptcy helps eliminate certain debt and other debt-related problems, there are other problems it can’t solve. Problems it doesn’t solve include:
- Preventing a secured creditor from repossessing your property. Bankruptcy eliminates debts, but not all liens. If Utah mortgage lenders successfully foreclose on your property, it can repossess the property, but the money it is owed will be eliminated.
- Child support and alimony. You simply cannot escape these payments. If you file Chapter 7 bankruptcy, you may qualify for reduced payments.
- Student loans. In very rare circumstances, your student loans can be eliminated. But, most of the time, this isn’t the case. In order to remove your repayment obligation, you have to show you can’t afford to pay them now and very likely won’t be able to any time in the future.
- Tax debt. Bankruptcy has very little effect on tax debt, although it can eliminate some older tax debt. If you are having difficulty paying your taxes, hire the help of a tax attorney or approach the IRS yourself. If you approach them first, you’re more likely to catch a break.
Bankruptcy is Scary, but Not the End of the World
Now that you know a little more how bankruptcy works and what you can do to manage it successfully, it’s not quite as scary. Going through bankruptcy is never easy, but now you’re armed with more knowledge for making the process a successful one for your situation.