Want to avoid bankruptcy?
Of course You Do!
How can you decide when bankruptcy isn’t the right option? Take a look at the steps below and also review our page: "Do I Need Bankruptcy Protection?":
Caveat - sometimes, due to unforeseen circumstances, such as the loss of a job, death of a spouse, large unforeseen medical bills, etc., it may not be possible or advisable to avoid bankruptcy.
Step 1: Give yourself a financial checkup.
Many people run into trouble when their credit cards get to be more than they can afford. Ask yourself these questions:
- Are you making only the minimum payment on your credit cards each month?
- Are you using your credit cards to pay for necessities, such as food and medicine, because you don't have the cash?
- Are you using your credit cards to get cash advances for normal expenses?
- Are you getting cash advances from one credit card to pay another?
- Are you making your monthly payment after the due date?
- Are your credit card balances more than your liquid assets?
If you answer "Yes" to two or more of these questions, you may be headed for trouble.
Step 2: Evaluate Whether Loan Consolidation is Practical
Medical problems, separation and divorce, and job loss or job change are the biggest causes of bankruptcy. A consolidation loan could be the right move in certain circumstances.
Caution -- in Florida, there is an unlimited "exemption" in bankruptcy for equity in your homestead--which allows you to PROTECT your home from creditors in case of a bankruptcy filing. If you perform a home equity consolidation you may forfeit this protection! This means that if the consolidation doesn't ultimately solve your debt problems, you could later lose your home in bankruptcy! Florida residents considering a home equity consolidation in lieu of bankruptcy should seek legal advice before choosing a course of action!
Only you can make the decision as to whether to attempt a debt consolidation in lieu of bankruptcy protection, but before you do it’s important that you do the following:
- Carefully review the terms of any new loan.
- Determine what your monthly payment will be under the new loan, and whether you can afford to make those payments.
- Make sure you will be able to make the new payments even if you are unemployed or unable to work for a six-month period of time.
- Take out only the amount needed to pay off your other debts.
- Cut up all of your credit cards after you pay them off—all of them.
Step 3: Still Not Sure . . . Take the 30 Day Challenge
Still not sure if bankruptcy is right for you? Take 30 days and follow these three easy steps:
- Know where your money is going: Keep track of all your everyday spending. Buy a small, pocket-size notebook, and write down everything you spend for a week or so. Literally. Write down every penny. Record convenience store purchases, automobile expenses (gas, parking, & tolls), meals, tips, money for coffee, etc. You may be shocked at how much of your money goes to different types of small expenses. It is not uncommon to find that you are spending over $1,000 a year just on the cup of coffee you buy each morning on the way to work. For those of you who are computer savvy, log your bank and expense records into a financial program. Quicken, for example, has a free edition which is very user friendly. These programs allow you to pull up a personal financial report with the click of a button and make it easier to track your finances.
- Develop a budget: Once you know where your money is going, create a budget by examining your spending patterns and looking at ways of maximizing your available resources. Many expenses may need to be cut back until spending is brought under control and bills are paid.
- Set up a Plan to Pay Off Debt: After expenses have been reduced and maximum spending levels have been identified for each budget category, the remainder of your available funds should be earmarked for payments to your creditors. Set goals & write them down. Whatever your goals, write them down. Identify a time frame for the accomplishment of each goal and the monthly amount needed to reach each goal.
- Prioritize Repayment--Pay Off High Interest Cards First: Be on the lookout for obligations that contain additional costs, such as late payment charges, over limit fees, and higher interest rates. Since these obligations will wind up costing you more, they should probably be identified as top priorities and paid first. Some of our clients rank their debts by interest rate, pay the minimum payment on all but the highest interest rate, and pay larger amounts to reduce the highest interest rate debt. When this debt is paid, they move on to the next highest interest rate, and so on.
What about Credit Counseling or Debt Management Companies?
We recommend great caution when dealing with such companies as deceptive practices are commonplace, click here for more information.
If you find yourself in a real bind, or need more information, call our office at (850) 267-1796 and ask for an appointment. Let us help you restructure your finances, schedule workout arrangements and, if necessary, advise and represent you in bankruptcy.