It is not uncommon to be wary of the word “bankruptcy” when you are consistently facing financial trouble. Whether you are tackling looming medical bills or struggling to meet long-overdue credit card payments, the possibility of bankruptcy is a reality that many just can’t seem to shake in their day-to-day lives.
While bankruptcy may be seen as an impending doom to many, the need to file for bankruptcy is not a terribly unusual occurrence. According to the American Bankruptcy Institute, 789,020 bankruptcies were filed by consumers and businesses in 2017. While this may seem like a large amount, it is admittedly nominal compared to the shocking 1,593,081 bankruptcies filed in 2010.
Whether you are financially comfortable or view bankruptcy as a possibility in your financial future, you should know that there are several ways to avoid the need to file for bankruptcy in the first place.
- First and Foremost, Take Bankruptcy Seriously
Bankruptcy is available to those who are in the midst of dire financial straits and should not be taken lightly. To some, it may initially appear to be the “easy way out” when it comes to escaping owed payments and collection calls, but relief from debt doesn’t come easy.
Anyone who is considering bankruptcy as an option, however, should certainly be aware of the risks that come with filing for bankruptcy in addition to the life-changing results that the process can leave in its path.
No two situations are exactly the same, but many experience similar complexities when it comes to dealing with bankruptcy. For example, filing for bankruptcy can severely affect your credit score with effects lasting for over ten-years following your filing. Additionally, filing for bankruptcy may require you to forfeit some of your personal property and can affect the lives of any co-signers to your debt.
- Create a Budget and Attempt to Pay Back Your Debt
While it certainly is not easy to get ahold of your debts when you feel like you have slipped behind, you should take all precautions to get any outstanding debts out of the way before you consider filing for bankruptcy.
The process of catching up on your debts (and determining whether it is a possibility in the first place) may involve creating a budget for you and your family. This means that you need to take into account all of the expenses you and your family face on a monthly basis, compare those expenses with your monthly, and determine how much money, if any, you can set aside to pay off your outstanding debts.
- Seek Consumer Credit Counseling Services
There are many non-profit and for-profit entities that offer consumer credit counseling services to those who are considering or in the midst of filing for bankruptcy. Consumer Credit Counseling Services (CCCS), for example, is a 501(c)(3) non-profit organization funded by government grants and donations and provides several different types of services to debtors across the country. Not only will these agencies typically provide assistance in crafting debt management plans and provide budgeting assistance, but may also offer aid in the form of financial advising before you even have to consider bankruptcy.
- Settle with your Creditors
While it may be daunting, speaking with your creditors and negotiating a settlement regarding your outstanding debt may be an option when it comes to avoiding bankruptcy. Not only does settling allow you to avoid the difficulties that result from filing for bankruptcy, but the lender will likely be pleased to know that they won’t be losing all of the funds they loaned you.
Negotiation, however, can be a confusing and arduous process, sometimes involving your creditors’ legal departments and contracts that could have an effect on your financial future. If you consider this option, it may be best to consult with an attorney who has expertise in the field of bankruptcy.
- Seek Financial Support
While it may seem like a last resort, asking for help is key in avoiding bankruptcy. Family and friends, if available, may be good resources for help in dire financial situations, but asking for a loan may put a strain on your relationship.
Alternatively, you may want to consider seeking help to cut your costs in other areas of your life. Specifically, you should consider looking to government-funded financial assistance through certain programs to cut costs in your day-to-day necessities. For example, Colorado offers programs such as SNAP, WIC, and more are available to those who have trouble paying for food on a consistent basis.
There is no shame in seeking help through bankruptcy, but there are many ways that the process can be avoided in its entirety. If you are considering bankruptcy and are wondering if it is right for you, contact our Colorado bankruptcy specialists today.
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