Before the Last Resort: What to Do If Youre Considering Bankruptcy
Filing for bankruptcy is an extreme move, not a quick fix. Its a long, painful process with a huge stigma, and youre unlikely to be able to get any kind of credit for ten years afterwards. Yet bankruptcies are on the rise. Out of ignorance or stupidity, more and more people seem to be using bankruptcy as a first option, instead of a last resort. Before you do it, make sure you’ve considered every alternative.
Have You Reorganized Your Debt?
If you havent tried debt consolidation or negotiation, you really should. Yes, youll have to pay back your debts eventually, but surely thats better than bankruptcy, isnt it?
Sell Everything You Can
Its better to sell everything you own than it is to go into bankruptcy. Move to a smaller house. Sell your cars and take the bus. Take a good, hard look at your life, and realize that there are very few true basics: you can do without almost everything. Your house is probably full of quite valuable things that you never use, so bite the bullet and get rid of them. In short, subtract your debt payments from your income, and live like someone who earns that much. You could lose almost everything you own if you declare bankruptcy, so you might as well try to sell it yourself at a better price and avoid the bankruptcy issue altogether.
If you can get extra hours, do it. Being bankrupt is such an indignity that you should at least try going to your boss and asking for a pay rise or promotion. After all, the worst they can do is say no. Theyre going to find out about it anyway if you declare bankruptcy, and they might wonder why you didnt come and ask for their help. Also, if youre married and only one of you works, try to get the other a job you never know, it might even be fun!
Use the Power of Threats
One of the best things to do when youre considering bankruptcy is to write a letter to absolutely everyone you owe money to, letting them know. Make it a very clear threat: If I cannot find a way of paying my debts then I will be forced to file for bankruptcy. Most creditors would rather let you pay back a tiny fraction of what you owe than have to try to get money out of a bankrupt.
Know Your Local Laws
Bankruptcy laws vary enormously depending on where you are. There are some places where youll be forced to give up everything you own to pay your creditors, some places where you at least get to keep your house, and some where you can declare yourself bankrupt and not even notice! Try to get a lawyer you might think that you cant afford one, but many will work pro bono (for free) for people who really need a lawyer but cant pay.