Bankruptcy

You are probably reading this because you are looking for some strategies to avoid bankruptcy. If so, keep reading, but you must be willing to make some sacrifices now to avoid the pain associated with 7 to 10 years of tarnished credit and high interest rates when you finance anything. The following are tips about how to avoid bankruptcy and how to rebuild your credit.

Tip 1 – Create a written plan

Take a simple folder labeled “debt-free plan”. Since you are entitled to one free credit report per year, run a report to find out exactly why you have bad credit. There may be outstanding payments that are inaccurate. If so, you must write the company and the credit bureau and, if possible, provide proof that the credit report is wrong. Also, decide which bills to decrease, and which bills to eliminate. For example, decrease eating out and eliminate premium cable channels.

Tip 2 – Take Decisive Action

After you communicate with the crediting agencies and credit bureaus, be sure to send a certified letter to ensure that your letter doesn’t get “lost”. In separate letters send each agency a summary of your conversation. When you call, gather the following information:

  • First and last name of the contact person and the first and last name of their supervisor
  • The team number (Equifax) of the person you spoke to
  • Ask for written confirmation of any promise they make
  • Get a copy of the universal data form. This is the document the crediting companies use to update your credit report. If they deny your request, ask them to send a letter to you confirming that they notified each bureau to change the discrepancies on your credit report.

Tip 3 – Consider a Debt Relief Company

You will notice people disagree with this perspective, but sometimes the amount of credit card debt that you have accumulated becomes too overwhelming. With all of the conflicting points of view about whether or not to consider a debt settlement company, here are some simple ways to determine whether or not you are a good candidate:

Do not consider debt relief if:

  • You have less than $10,000 in credit card debt
  • If you are planning to finance a house or car within two years
  • If phone calls from collections agencies bother you

Consider debt relief if:

  • You are thinking about filing bankrupt because of unsecured debt (Student loans don’t apply here)
  • If the burden of bad credit and higher interest rates is overwhelming
  • If you want to reduce your credit card debt by around 40 to 50 percent
  • If you want to be credit card debt free

Regardless of the choice you make, just be sure to explore all of your options and consult an expert before you file for bankruptcy. Keep in mind, any choice you make to get out of debt will require some element of pain. If you have the right mindset to (1) make some strategic sacrifices; (2) remain disciplined in your spending; and (3) stick to your written plan, you will spend the rest of your life debt free. Begin this difficult journey with the end in mind and you will emerge victorious.