Preparing Yourself For Bankruptcy

By Author: Rob Nichols
Total Articles: 8
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You’re afraid to open the mail. You avoid answering the phone. You even stopped checking your email because of creditors constantly harassing you and asking you to pay off your debt. You’re looking at only one option: bankruptcy. Your financial crisis has left you no other choice, but it’s a choice you will live through and come out alive from. Preparing for bankruptcy comes with making life-altering decisions. Bankruptcy means tightening your financial belt, paying off your debt slowly, and selling off your assets to help repay creditors.

Setting a Course of Action

Debt leaves you with very few choices. The choices you do have force you to make some tough decisions. Before you hurry up and file, you have to set a course of action and figure out what you may end up owing. For most Americans, Chapter 7 or Chapter 13 bankruptcy will be the two most common forms to file under. Americans filing for either should set aside some time to figure out how much debt they actually owe. Start adding up all the secured debt, i.e., car loans, student loans and mortgage payments. Add up how much each payment is a month ...
... and the interest you accrue. Next, take out all of your credit card statements and add up your total debt (include your monthly interest as well). Finally, add up your monthly bills: water, electric and insurance.

Making Reductions

Adding up all of your bills will give you an idea of what items can be cut out. Once you visit an attorney, like a bankruptcy lawyer in Woodland Hills, you’ll have an understanding of what you can live without. Once you have everything added up, it’s time to make adjustments where possible; that means reducing your phone bill, cutting back on electricity and lowering your insurance if possible. If you own a home, paying your mortgage takes priority, while dining out, credit card payments and even a phone bill can be minimized or cut out completely.

Sell off Anything That Isn’t Necessary to Have

This is where preparing for bankruptcy gets tough. Don’t sell off any family heirlooms if possible. Keep them because when you get out of bankruptcy you’ll be glad you did. Instead, focus on old electronics you may have—iPads, computers and television sets you can live without. If you plan on filing for Chapter 7, these items may be first to get sold, while your home and car may be kept. If you have trouble understanding what to sell, a lawyer, such as a Van Nuys bankruptcy lawyer, can assist you.

Making small preparations can help you adjust to your new lifestyle. Everyone in the family will miss some comforts, like cable and Internet, but it’s a valuable sacrifice families must make to save a home.