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How do I prepare for bankruptcy?

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It is not uncommon for people to grapple with the idea of filing for bankruptcy. Most Americans find it difficult to admit they can’t simply fight their way out of financial trouble through planning, perseverance and hard work. Unfortunately, debt has a way of compounding and growing into an insurmountable obstacle. If you are considering bankruptcy as an option for debt relief, it is likely you should have already filed.

Once you have decided to file, there are some things you might want to keep in mind. This is not blanket advice, mind you. Every financial situation is different, and you should always act on the advice and guidance of your chosen bankruptcy attorney.

  • Stop using your credit cards and borrowing money: Once you have made the decision to file for bankruptcy, continuing to increase your unsecured debt could be considered fraud. Essentially, the legal system might believe you are making purchases simply because you know you’ll never have to pay the debt back.
  • Stop paying (certain) bills: Like the above note, but in a more positive spirit, it is wise that you stop paying back certain unsecured debt. A credit card payment, for example, could be skipped, but a car loan should not. Again, as mentioned before, make sure you consult with your bankruptcy attorney on financial decisions like this. The last thing you want to do is further damage your situation.
  • Build a strong budget: While bankruptcy will clear a significant portion of your debt, it might also make things a bit tight for some time. You might find it difficult to get a new credit card or secure a personal loan, for example. It is wise to build a solid financial plan and stick to it.
  • Plan your recovery: In addition to your budget, you should work with your bankruptcy attorney to develop certain financial milestones to rebuild your credit. Opening a savings account, for example, immediately upon your debt discharge is a terrific way to begin building strong, positive financial habits. Additionally, you can rebuild your credit rating starting with secured credit cards. These are credit cards that work much like a bank account. You deposit a certain amount of money into the account and then can use only that amount through credit card purchases. You might pay higher fees or APR, but this is a way to begin the road to recovery.

It is important to reiterate that every situation is different. What might work for your neighbor might not work for you. It is crucial to follow the guidance of a trusted legal professional. A bankruptcy attorney can provide the answers and advice you need.