Even though the economy seems to be in a slow recovery, there is still a lot of debt and bankruptcy. People and businesses that have trying to hang on are finally reaching the end of their ropes.
If it wasn’t you, it most likely has happened to a family member, friend or acquaintance. One court has seen filings double from 2007 and it’s not over yet. There are steps you should take before taking this legal action.
Understand Your Current Situation
Gather all your bills and total the monthly obligation of all. Designate which ones are required for living such as power, food, and housing.
Then identify expenses that are optional such as dining out, cable and gym memberships. The last category would be debt including loans and credit card bills. Don’t forget irregular bills such as property taxes and home insurance.
Create a Plan to Decrease Expenses and Increase Income
Go through each category of expenses and figure out what can be trimmed or eliminated. Be ruthless. You can always sign up for cable when times are better. Instead of exercising at a gym, make do at home.
Negotiate with credit lenders if the account hasn’t already gone to collections. They might be willing to work with you on interest rate cuts or lowering minimum payments during the crunch time.
Make sure to include selling assets in the plan. Is a second car essential? Check your garage, closets and shelves for items of value that you can sell and generate some income.
Get a second job to generate more income. Who knows you might find delivering pizza can generate cash and inspire a blogging career?
Work the Plan
Follow the new budget and make all payments on time. Get all the family on-board so they don’t sabotage your efforts. Kids are amazingly resilient and supportive when included in the family’s need for saving and cutting expenses.
Apply all extra income to debt payments after taking care of basic needs. Reevaluate and see if you can get through the crisis or whether it’s time to seek counseling.
Trained financial counselors can help you figure out if the debt can be overcome or not. Sometimes all these steps can’t prevent bankruptcy, but it should never be the first solution. Once you have exhausted all of your other options, you may consider talking to a San Diego bankruptcy attorney for professional help.