How To Avoid filing for Bankruptcy

You may find it odd to be getting advice from a bankruptcy attorney on how to avoid filing for bankruptcy. To show my sincerity, I’ll provide a list of things to consider. The following is distilled from thousands of scenarios I have encountered over the years assisting my clients.

To break through all of the mental clutter while trying to avoid a bankruptcy filing, ask yourself this:

“Can you pay all of your debt back in a way that your creditors will accept? Can this be done without extreme hardship on you and your family?”

To thoroughly answer these questions, consider the following:

1. Consider all your debt.

We tend to focus on the creditors who cause the most stress. Maybe you’re being harassed by a specific creditor, or one of them filed a lawsuit against you. Remember, there are other creditors who could do the same in the future, so don’t leave out the quiet creditors. Consider creditors you have not heard from in a while, the ones you are current with, your back taxes on an installment plan, or your unfiled tax returns that are likely to result in liability. Don’t leave anyone out when you are trying to determine if not filing is an option.

2. Don’t leave out co-signed debt.

If you signed as a co-singer or are the co-debtor on a loan document, you are most likely liable for the entire balance (and not just half of it). So, if you co-signed for someone’s auto loan, or your kids’ student loans, consider that debt as your debt. I can’t count how many bankruptcies I have filed for people who were being sued for loans they had cosigned for a family or friend.

3. Consider if you can pay back the debt.

You may be behind on your payments or may not be able to pay the full-balance owed. Often creditors are willing to work out a payment plan with you. They may even be willing to accept a smaller amount as the payment in full. Find out if you settle or if you can workout a payment plan to repay all your debt. It only takes one hostile creditor unwilling to negotiate to mess up your proposed calculations. Due to this it it crucial to find out if all your creditors are willing to negotiate terms you can practically fulfill.

4. Compare your income to the terms you have been able to negotiate with your creditors.

Is your income enough to maintain the payment plan you have worked out with your creditors? In trying to maintain said plan would you have to take on a second job? How much extra pressure can you and your family bear? Considering these things is necessary to avoid biting off more than you can chew.

If you can pay off your debt without serious hardship, then bankruptcy is not for you. If you can’t, then I suggest that you consult with a bankruptcy attorney just to see what other options you may have. The sooner you do this, the faster you can get the situation resolved.

Use this checklist to help you gather all your debt.

• Unsecured Debt: Credit Cards, unsecured loans (loans you did not pledge anything as collateral), unpaid bills (Old utilities bill, old cell phone bills…), medical bills, auto repossessions, payday loans.
• Secured Debt: Mortgages, Home equity lines of credit, auto loans, any loan you pledged something as collateral, back HOA dues, furniture loans
• Taxes: Back income tax, property tax, any other tax you owe, Child Support, alimony, spousal support