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What to Check Before Filing Bankruptcy: There Are No Fresh Starts
By Stewart Pelto on September 3, 2010

MP900309387-(1).jpgBankruptcy can be overwhelming. There are forms to fill out, federal requirements to be met, and debts to be discharged (or declared non-dischargeable). There’s a lot to check before filing for bankruptcy, but be sure to check this out before anything else: is there any way you can AVOID filing for bankruptcy?

The Bankruptcy Abuse Prevention & Consumer Protection Act of 2005 requires you to seek help from a government-approved credit counseling agency within 180 days of filing for bankruptcy. The U.S. Department of Justice can help you locate an approved bankruptcy counseling agency (Alabama or North Carolina, please contact your local Bankruptcy Administrator instead). Your appointment with a counselor will last around ninety minutes and should run you about $50 (this charge can be waived if you REALLY can’t afford to pay).

Your goal is to AVOID bankruptcy at all cost, so use your session to draw up a budget and develop an action plan to get back on your feet. Collect all your bills, credit card statements, and home and car payments and show them to your counselor. Identify your luxuries and cut them out. Sell old stuff to generate cash. Get a part-timer slicing potatoes while you look for a proper job. Do whatever you need to get back within your means and save money to put towards your debts.

It’s drastic, but tightening your belt like this and sticking to a budget can save your report from the nasty ten-year stain that bankruptcy leaves. In ten years’ time, you could get a Bachelor’s, a Master’s, and a Ph.D. and STILL get skeptical looks from lenders.

Resist the temptation to “solve” your problems by filing for bankruptcy, but if it’s inevitable, use your appointment to hammer out some details. Do you want to file for chapter 7 or chapter 13? What steps are you going to take to make sure this never happens again? Seriously, what specific steps are you going to take to make sure this Never. Happens. Again?

P.S. Make sure to get a certificate indicating completion of your counseling session. You’ll need to file it along with your bankruptcy papers.
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