Tips For Avoiding Bankruptcy
Debt is an ever-growing problem many Americans face. If your debt situation feels too much to handle, it may be tempting to consider bankruptcy your only choice. Before you make that leap, make sure you have a thorough understanding of exactly what bankruptcy means and all the other options available.
Experienced personal and business bankruptcy attorney James Shenwick defines bankruptcy as “when your liabilities exceed your assets or you have insufficient cash flow to service or pay your debt.” Essentially, bankruptcy is when somebody doesn’t have enough money to pay their bills. Filing for bankruptcy is the action of submitting a case to the United States Bankruptcy Court to try to be declared insolvent. Depending on the specific situation, the individual files under a specific chapter of the bankruptcy code, most commonly being Chapter 7 and Chapter 13. No matter what you decide to choose, declaring bankruptcy is a serious choice that should be avoided at all costs.
How Declaring Bankruptcy Affects You
While every situation is unique, bankruptcy comes with a range of potential consequences that anybody considering it should know. The filing remains on your credit report for six to seven years, affecting your ability to get credit for years to come. Chapter 7 bankruptcy filings more negatively impact a person’s credit report than Chapter 13. Some personal property may also be surrendered, depending on which bankruptcy chapter you qualify under. Not all debt can be totally wiped free, and cosigners for any of your debt may also need to bear sole responsibility for it. The court determines if debt like student loans will qualify. Filing for bankruptcy is not free, as each chapter requires a different fee, along with any legal fees.
How To Avoid Bankruptcy:
- Reduce unnecessary expenses- You will need to make many serious life adjustments to climb out of debt, such as cutting any unnecessary expenses.
- What can you sell?- Extra pieces of furniture, collectibles, and designer clothing can be good for an easy cash turnaround. If it’s not necessary for your life and you could get quick money for it, every little bit helps.
- Switch to cash- Budgeting your income is a key component of overcoming debt, so you should find a method that works for you. If credit cards are a huge percentage of the reason you’re having issues, switching to cash could be a straightforward way to physically portion funds.
- Get a second job- If one paycheck isn’t enough to cover the bills, then maybe you need a second one; even if it’s just a part time hustle, you can use the extra money to pay down debt faster.
- Reach out to your creditors- Most creditors are amenable to finding an optimal way to settle the situation rather than losing the money they loaned you. Negotiating with your creditors can be helpful in working out a repayment plan and lowering your interest rate.
- Refinance your mortgage- Refinancing your home and getting cash out is one solution to high-interest credit card debt. Since your mortgage is secured debt, it features a much lower interest rate than most credit cards, and refinancing your mortgage can be a tool to use secured debt at a low interest rate to pay off high-interest unsecured debt.
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Izquierdo & Leon Law are a top bankruptcy law firm in Miami. Call Izquierdo & Leon Law to discuss your bankruptcy and other litigation options today.