| What is bankruptcy? | | | | there are many self-professed counselors who |
| | | | will charge high fees and whose services may |
| Bankruptcy is a process by which a debtor can | | | | be of little value. Consider utilizing a |
| obtain court-ordered relief from his debts. | | | | non-profit financial counseling service. |
| While bankruptcy can be a valuable necessity | | | | |
| in some cases, not everybody who faces | | | | "Working Out" Your Debts |
| financial difficulty should file for | | | | |
| bankruptcy. | | | | Some creditors will work with debtors, even |
| | | | waiving part of a delinquency or waiving |
| Should I declare bankruptcy? | | | | interests on a debt, provided the debtor |
| | | | agrees to make payments on the debt. |
| There is no "quick and easy" answer to this | | | | Sophisticated creditors know that some debts |
| question. You should discuss your situation | | | | can be hard to collect, even if you don't |
| with a credit counselor or a bankruptcy | | | | declare bankruptcy. Collection agencies often |
| attorney, to evaluate the costs and benefits | | | | take a percentage of the debt they collect as |
| of bankruptcy given your personal financial | | | | payment, litigation can be timely and |
| situation. The type of debt you owe can be a | | | | expensive, and forcing a bankruptcy may |
| significant factor. Factors which may affect | | | | result in an even smaller recovery. |
| your decision to file for bankruptcy | | | | |
| protection are detailed in this associated | | | | Refinancing |
| article: Filing For Personal Bankruptcy | | | | |
| Protection in a U.S. Court. | | | | If you own a home, and have some equity in |
| | | | the home, consider refinancing your home to |
| What are the alternatives to bankruptcy? | | | | pay off all of your high interest debt. You |
| | | | may be able to obtain long-term financing at |
| There are numerous alternatives to filing | | | | a much lower interest rate, allowing you to |
| bankruptcy. Determining which, if any, are | | | | consolidate your debts, lower your monthly |
| appropriate for you depends in large part | | | | payments, and obtain a tax deduction in the |
| upon your personal financial situation. It is | | | | process. |
| a good idea to seek financial counseling | | | | |
| prior to making a decision as to whether to | | | | Please be careful when dealing with companies |
| file bankruptcy, or regarding which | | | | which offer to combine all of your debts into |
| alternatives may work for you. Possible | | | | a single "low payment" loan. Some of those |
| alternatives include: | | | | companies collect large fees while offering a |
| | | | loan package that is inferior to that which |
| Financial Management | | | | you could obtain through a bank or credit |
| | | | union. A poorly structured loan may leave you |
| While it means giving up a great deal of | | | | paying interest for years, while making |
| control, you may wish to utilize a financial | | | | essentially no progress on paying down the |
| manager to pay your bills, and to put you on | | | | principal of the loan. |
| an "allowance," until your finances are back | | | | |
| in order. This can be particularly helpful if | | | | Avoiding Credit Repair Scams |
| your financial problems emerge from bad | | | | |
| spending habits. You may also wish for a less | | | | Whether before or after bankruptcy, many |
| intrusive form of management, such as simply | | | | people are attracted to offers to "repair bad |
| having a financial counselor help you create | | | | credit" or even to "remove" a bankruptcy from |
| a budget. | | | | their credit history. Most such offers are |
| | | | fraudulent. |
| Choose your financial counselor carefully, as | | | | |