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When to file for bankruptcy

On Behalf of | Jul 16, 2020 | Bankruptcy

Despite its negative connotations, bankruptcy laws are some of the most helpful laws for U.S. citizens. Declaring bankruptcy offers an individual a second chance at financial success when economic hardships become too much to bear.

Although bankruptcy does offer many people a way out of deep debt, it comes with a cost. Before declaring bankruptcy, people should examine all their options first.

Options to explore before declaring bankruptcy

Most states require that an individual undergo financial or credit counseling before filing for bankruptcy. This process ensures that people file in good faith and have tried everything possible before this last resort.

Some financial tactics that can help people overcome debt include:

  • Find a credit counselor: Credit counselors work with a person’s credit card debt, examining rates and limits to find the most beneficial payment solution. Counselors may help people move their debt around to locate a more favorable annual percentage rate (APR). Credit counselors can weight the benefits of debt management programs, debt consolidation loans and debt settlements with creditors.
  • Design a tight budget: Many people’s financial issues may stem from irresponsible spending. Financial counselors can help individuals dissect their budget and locate opportunities to reduce spending or increase income. A temporary second job may also help considerably.
  • Debt settlement: Most creditors would like their customers to pay their debts. Declaring bankruptcy would prevent creditors from receiving their due, so many are willing to work with people facing a financial crisis. Settling debt will reduce payments to manageable chunks while ensuring creditors still get their money.

Financial counselors may have more suggestions for those considering bankruptcy. If these tactics do not work, people may have no choice but to file for Chapter 7 or Chapter 13 bankruptcy.

A lawyer can assist with bankruptcy paperwork

Declaring bankruptcy is a complicated legal process. Most people find greater success with the services of a local lawyer experienced with Alaska’s bankruptcy laws. An attorney can help locate a trustworthy credit counselor and draft comprehensive debt settlement agreements.