Even though we are in difficult economic times with rising inflation, decreasing property values and a lack of availability of decent paying jobs, it is still no excuse to not keep diligent track of one's financial situation. Sure there are many unexpected circumstances that can arise and throw an individual's finances into a tailspin, making the decision for filing bankruptcy the only way out. But these days everyone should be proactive and take a few simple steps to hopefully keep them from having to file bankruptcy in the future.
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If an individual is having financial difficulties the first thing they should do is sit down and determine their budget. This is easily accomplished by calculating their net monthly income and then deducting all of their living expenses including rent, food, utilities, insurance, gas, etc. What money is left over, if any, is the amount available that the individual has to spend every month. People need to keep in mind that they should include in their budgeting late fees, overdraft fees, interest rates, and also allow extra for unexpected expenses that may come along such as a car repair or medical bill. Many individuals don't allow extra funds for unforeseen emergencies and tend to spend any money they have left. Also, with the ease and convenience of credit cards, many individuals have gotten caught in the "buy now and worry about paying for it later" cycle only to realize too late that their cards are maxed out. These people are usually the ones that end up filing bankruptcy. However, careful budgeting and eliminating all unnecessary monthly expenses, at least for a predetermined time frame, can greatly aid in developing a financial plan. The next step is to then implement that plan and stick to it. If the individual re evaluates their expenses to see where they can make cuts in areas such as cable TV, cell phone, dining out, or buying new clothes, they can then use this money to pay off debts. Fiscal responsibility should be a priority for everyone, even if they are not in danger of filing bankruptcy.
Financial counseling is another solid option to avoid filing bankruptcy. Financial counselors are a great and often under utilized resource that can help individuals determine the fine line between spending money on unavoidable situations and wasting money on something that is not a necessity. Counseling from a professional can help the individual determine the changes they need to make in their life and spending habits to gain financial responsibility and success.
If someone is trying to avoid filing bankruptcy making other changes such negotiating with creditors to lower interest rates on accounts can help. If at all possible, the individual can try to talk to their mortgage lender to apply for a loan modification. Just a quick word of caution here, many people that are trying to avoid bankruptcy might get themselves into a debt consolidation program thinking that this will keep them out of bankruptcy. These same people need to be aware that there are many shady companies out there that will either take their money and leave them hanging, or improperly negotiate and the lender will then get a judgment, lawsuit or wage garnishment against the debtor forcing them to file bankruptcy. There are some reputable debt consolidation companies out there, but the debtor should be cautious. The best starting point would be to consult with a reputable bankruptcy lawyer to discuss the individual's personal financial situation and what options are available to them besides filing bankruptcy. The bankruptcy lawyer can steer them in the right direction to get back on track becoming financially stable.
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