DECLARING BANKRUPTCY AS A LAST RESORT

2007-03-08 10:33:40

( Financial )



You are overburdened by debts, and in a last ditch effort to rescue yourself from drowning, you think of declaring bankruptcy. Before making your move, make sure that you understand bankruptcy and its consequences.

To begin, you should be certain that declaring bankruptcy is your only resort. If not, explore the alternatives. Seek credit counseling from nonprofit organizations. Negotiate an informal arrangement with your creditors. Employ a financial manager to help you prepare a budget and keep track of all your expenses. Hire a company that specializes in unsecured debt consolidation.

Prior to declaring bankruptcy, be aware that there are certain debts that bankruptcy can’t get rid of. These include alimony payments, debts arising out of fraudulent acts, student loans and fines or penalties imposed by the Court.

In addition, you should understand the adverse effects of declaring bankruptcy. It is reported on your credit for the next ten years.

But if you have assessed your financial situation, and declaring bankruptcy appears to be the sole remedy, you should employ an attorney or a licensed trustee to assist you through the proceedings. You would need to submit the necessary documents including information on all your earnings, assets, debts and creditors. The court will then order your creditors to put off collection efforts.

After you have emerged from a bankruptcy, it is suggested that you open a bank account immediately. Get a credit card as well. Regularly pay your bills. This is to rebuild your credit standing and show possible lenders that you are now capable of handling your finances responsibly. Refinancing after bankruptcy is not difficult if you prove that you are a good credit risk.

Be reminded that bankruptcy is not the single solution to solving your financial woes. Though the formal process is relatively easy to follow, it can be emotionally difficult for everyone involved. Consider the other options first.


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