WHEN BANKRUPTCY COULD BE THE RIGHT OPTION FOR YOU

You are incurring new debt in order to pay off your old debt. If you repeatedly have to borrow money to pay off your creditors, bankruptcy may be the right option for you. Your expenses are covered by your overdraft account, or cash advances from your credit cards. If you cannot pay your basic expenses without dipping into your overdraft account, you may want to consider bankruptcy. This is especially true if you find that you are only able to pay off a portion of your overdraft account each month so that you can control your debt better. You repeatedly skip payments for your credit cards or other bills. If you cannot afford even the minimum payments that you are required to make each month, your financial straits are probably dire. Consider filing for bankruptcy.

If you haven’t truly tried your best to curb your spending. Deep down, if you know that simple financial planning and belt-tightening will rein in your debt, then you don’t need to file bankruptcy. Start managing your debt today. When you have not pleaded your case to your creditors. Ask for consolidations and extensions on payments, and make good faith attempts to pay down your debt. Ultimately, your creditors want the money you owe them, so if the minimum payment is not manageable for you, ask them if you can pay a smaller amount. After all, some payment is better than no payment.

Avoiding temptation has two sides: The frst is to change patterns that put you in the path of temptation. The second is to practice contentment. Combined, these two factors can save you both money and grief.

Use a debit card. You can't spend more than you currently have in your checking account (although you need to be careful, because you don't want an empty checking account when it comes time to pay bills).

When bankruptcy will irrevocably destroy your credit. Some people think that filing for bankruptcy means a clean financial slate and a chance to start over. While it is true that your debt is wiped out, it is false to think that your financial reputation will not suffer the stigma of bankruptcy. Bankruptcy will follow you around for years, making it difficult to get car loans, mortgages, and student loans in the future. Think very, very carefully before filing for bankruptcy.

Once you have started to pay off your debt, you will want to ensure that you don’t return to your debtor’s ways in the future. One way to do that is to build a cushion for emergency expenses, such as car or home repairs, into your budget. This will save you from having to charge large, unexpected expenses on your credit cards, creating another cycle of debt.

Ideally, you will open a separate savings account for this emergency fund. Because it is an emergency fund, and you will want to be able to access it easily, you should consider opening a regular savings account for it. Don’t worry about the interest rate on this account—this is not a growth investment. Instead, think of this fund as insurance against life’s catastrophes.
How much you put into your fund is up to you, of course. Most experts recommend that you save an amount equal to between three and six month’s worth of expenses. Sounds like a lot, right? Well, don’t be scared off! It is fine to start small and build your account over time. One way to do this is to ask your employer if you can have a set amount of your paycheck deposited directly into this special account. If this is not possible, establish a date each month when you will transfer a set amount into the savings account from your checking account.

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