Five Steps to Take Before Filing Bankruptcy

Because of new bankruptcy laws enforced in late 2005, many people burdened with large debts will be unable to completely walk away from their financial obligations. Even though bankruptcy continues to be an option, it should still be considered as a last resort. Several people have climbed from under excessive debts. Granted, filing bankruptcy is much easy, and requires little effort. Nevertheless, the long term effects of filing deter many. If looking for a way to gain control of debts without filing bankruptcy, consider the following tips.

1. Create a Debt Eliminate Plan

Credit cards and other debts cannot be eliminated without a realistic and achievable plan. Persons wanting an easy fix to debt problems are more likely to file bankruptcy. However, excessive debts were not created overnight. Thus, it is unrealistic to expect the problem to miraculously disappear. With this said, tally debt totals and determine how much you can afford to spend on reducing the balance. Based on an affordable amount, estimate a payoff time.

2. Use Cash Only

If your disposable income allows easy repayment of debts, make a vow to use cash for all purchases. Keep the credit cards lock in a safe or file cabinet. Once the household bills are paid, use the excess toward repaying debts. Because credit cards will not incur new charges, a noticeable balance reduction will occur.

3. Sell Valuable Belongings

The idea of selling ones belonging is nerve-racking. Nonetheless, this can provide a quick answer to debt problems. For example, if you have three vehicles, consider selling one and using the money to reduce credit card balances. Online auctions make is easy to sell electronics, jewelry, and other personal belongings. After cleaning out closets and garages have a yard sale or list the items with a consignment shop.

4. Get Credit Counseling

There is no easy way to eliminate debts. However, persons taking advantage of credit counseling can realize their dream within two to seven years. Credit counseling or debt management is ideal because these agencies help people obtain better rates on credit cards and other debts. A representative will negotiate with creditors on your behalf. Once bargaining is complete, a repayment plan is established.

5. Seek Additional Employment

Sadly, some people are overwhelmed with debt. If you fall into this category, seriously consider getting a second job, or seek a higher paying position. Persons living paycheck-to-paycheck have little disposable cash for repaying debts. However, obtaining additional employment may provide the necessary funds and help you avoid bankruptcy. Even though working two jobs may create a seemingly unbearable schedule, it is a small price to pay for debt relief.