5 Steps to Take When Filing for Bankruptcy

5 Steps to Take When Filing for Bankruptcy

If you're planning to file for bankruptcy, read this informative Savvy Sugar article.

Bankruptcy may sound scary, and it should be. Filing for it should always be looked at as the last resort. It's a difficult and emotionally exhausting process, which requires the aid and expertise of an attorney. The legal costs can run up to thousands of dollars, and the effect on your credit score is quite damaging. Read on to see if bankruptcy is right for you.

Alternatives to Bankruptcy

Are you really out of options? You need to have given some serious effort to paying off your debt. Make sure that you've tried to lower the interest rate of your debt or negotiate better terms. You can also seek help from a credit counselor. Greatly downsize your living expenses with a smart budgeting plan and find ways to earn extra money.

Know the Ramifications

Your life isn't going to be one clean slate after filing for bankruptcies. You'll still be responsible for some debt, like student loans and tax debt. Although you filed for bankruptcy, anyone who you cosigned or guaranteed the loan with is still obligated to pay and may even have to pay off the debts you're off the hook for. Your credit score will be greatly damaged for years, which means that it'll be very hard for you to take out loans, and the interest rates will be very high. You can also face problems when getting a new job, since a lot of employers now request a credit report from potential hires.

Gather Documents

You need to start gathering financial documents together for your lawyer. Get a hold of records of your debt, which includes credit card bills, unpaid medical bills, loan statements and more. Find documentation of the assets you currently hold and monthly income statements. Your attorney will help you figure out what else you need.

To see the last two steps to take before filing for bankruptcy, head over to Savvy Sugar

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