Okay, so you’re facing huge debts from different creditors. The question is, should you file for bankruptcy? Is it the solution to your debt problem? In this article, let’s discuss the points that you should first consider before resorting to bankruptcy.

How much do you really owe?

Have you stopped to calculate your total debts with all your creditors? Before taking any drastic action, examine your financial situation by obtaining a copy of your credit report. Are all the charges in your report correct? Check if there are unauthorized charges that add up to your burden. If so, send a dispute letter to your creditor to clear up those charges.

If your report doesn’t contain errors, calculate your total debts and create a repayment plan. Prioritize your debts according to the interest rate. To keep from further accumulating, it’s best to pay off your high interest debts first and work your way down.

Have you talked to your lenders?

After checking your credit report, speak with each of your creditors and propose a negotiation. Before meeting your lender, create a realistic plan so repayment would be easier for you. Explain your financial situation to your lender and discuss the repayment plan you’ve created. Don’t hesitate to request for a reduced interest rate or a lower monthly payment. You can also request for the penalties and other additional costs to be waived.

You’ll be surprised that many lenders are willing to adjust their terms to help a customer with his repayment. If you’ve been a long time client and your records show that you’ve been a good payer, there’s no reason why your lender would not extend consideration. Most lenders prefer to help their customers keep up with their debts than to see them file for bankruptcy.

Have you explored your repayment options?

After negotiating with your lenders, you should have slashed off a significant amount from your debts. This time, consider the steps that you can do to execute your repayment plan.

• • Is it possible to borrow money from a friend or a relative?
• • Can you sell some of your assets to produce the money you need for repayment?
• • Can you cut back on your expenses so you can focus on repayment?
• • Can you get a second job to earn additional income?
• • Can you get a low interest consolidation loan?

Have you done research about the bankruptcy process?

Before deciding to file for bankruptcy, see to it that you clearly understand the process. Filing for bankruptcy is not an easy way to be free from your obligations. Since the bankruptcy law was amended, consumers are now required to complete a credit counseling course at least 6 months prior to filing. If your counseling agency recommends that you file for bankruptcy, that’s the only time you can begin with the process.

Filing for bankruptcy is also a complicated process. It is recommended to hire a bankruptcy lawyer to help you prepare all the documents you need for filing. Furthermore, you’ll need to take the income means test to determine whether you qualify for a Chapter 13 of Chapter 7 bankruptcy.

Remember that a chapter 13 bankruptcy does not completely exempt you from all your debts. Under the law, you would be subjected to enroll in a repayment program, where a percentage of your monthly income would be automatically deducted to pay off your creditors.