The Causes of Bankruptcy and Alternatives to Filing

No one wants to file for bankruptcy. No one. People who file are not filing because they do not want to pay their bills. All people want to pay their bills! However, bankruptcy can happen to anyone. Do not be afraid or ashamed to contact an experienced bankruptcy attorney to help you through the process that will end with a fresh start for you and your family.

 

How Did I Get Here?

The most common causes of having to file for bankruptcy include

• Loss of job
• Death of spouse
• Divorce
• Major illness

In today's society, parents often want more for their children. To provide this higher standard of living, both parents must work. This can be a problem if one of the spouses falls ill or loses a job. Because the family's expenses are based on two incomes, losing one income can quickly lead to falling behind on paying bills and racking up debts. Imagine if one spouse were to become ill-the remaining spouse would not only have to stay home to take care of the sick spouse, but the family's income would be reduced drastically. If you think that bankruptcy cannot happen to your family, please be sure you never get sick, never get divorced, never get laid off, and never practice poor financial discipline-and be sure you carry full-coverage insurance. As you can see, there are many factors can may contribute to a family's financial crisis. If you think none of these will ever happen to you, good luck! But if they do, remember that you are not alone, and filing for bankruptcy is not something to be ashamed of.

 

I Don't Want to File; What Else Can I Do?

Perhaps you aren't ready to file for bankruptcy, and you'd like to explore some other options to help you deal with your mounting financial pressures. Well, you can try things like contacting your credit company to see if they'll work with you, refinancing your mortgage, or attending consumer credit counseling. All of these may seem like great ideas, but there are several reasons why these may not be the best answer for you. Let's explore these alternatives to bankruptcy in detail.

Contacting your credit card companies to negotiate. This will only work with creditors who are willing to work with you. Most of the time, the debtor (that's you) will hear, "We want the full amount or we will report you to the credit bureau. " Then you might try making only the minimum payments, but you'll soon see that all of your money is going to pay the interest. When your total monthly income minus the minimum payments on your debts leaves you with nothing and keeps you in perpetual debt, remember that bankruptcy will get you off this roller coaster and begin to reestablish your credit-it's a fresh start. Bonus: filing bankruptcy will STOP the collections calls, and will end the harassment of being hounded at work and being threatened (the threat is the credit card company's most powerful tool to collect on your unsecured debt).

Refinance your mortgage. Most people are not eligible to refinance their mortgage because the home has no equity and they can't afford the fees. If you are eligible and able to refinance, you still shouldn't take this route unless it would lower your monthly payments and help you pay off the loan sooner. Otherwise, here is something to keep in mind: If you have equity in your home and you refinance to get the cash to pay off unsecured debt (credit cards, medical bills, etc.), you then have a higher house payment to deal with. If something happens to cause a problem financially, you now risk losing your home instead of simply dealing with harassing credit card companies. There is no reason to give credit card companies the right to take your property (which, in essence, is what happens when you lose your home to pay your credit card bills). Did you know that those companies are making obscene profits year after year? Filing for bankruptcy can eliminate those credit card debts and help you keep your home.

Contacting a credit counseling service. Two types of consumer counseling agencies exist: for-profit and nonprofit. The for-profit agency has a slick way of making money off you while not doing much to improve your situation. They will advise you to stop making payments on your credit cards for several months; during this period, the agency will bank a monthly payment from you to pay off the accounts (while your credit rating goes down and down and . . .). Once the debts are late enough to be sent to collections, the agency will renegotiate with the creditors and consolidate the debts so you can pay them off. The agency collects huge fees from you, but while you do pay off the renegotiated debts, your credit is damaged terrifically.

The nonprofit agency (did you know these are funded by the credit card industry?) may be of help but only if you are in a situation that allows you to make the large monthly payments. These agencies will consolidate and reduce interest rates, and then you pay a heavy payment each month until the debts are clear. Less than 10 percent of people should explore this solution rather than file for bankruptcy.

 

If any of this sounds familiar, please know that you are not alone. It is very important to have a bankruptcy lawyer on your side to make sure you know the intricacies of bankruptcy in your state. Bankruptcy is usually the best option when you find yourself in an unthinkable financial situation because it allows you to stop being harassed, eases the anxiety and worry about your finances, and gives you a fresh start.