Debt impasse: Brace yourself before filing for bankruptcy

April 3, 2013


For many consumers as well as budding entrepreneurs piling up financial obligations may blind their vision of looking for various debt relief options, other than bankruptcy. Though it is true that bankruptcy should be considered as the last resort, yet a lot of debtors fail to heed this advice. According to the debt experts and credit counselors, before debtors file their bankruptcy, it is important for them to undergo a credit counseling session and be prepared for all the complex procedures that are inherent in a traditional bankruptcy case.

When should you opt for bankruptcy?



Before you file bankruptcy, it is best to try out various other debt relief alternatives like debt settlement or debt consolidation. This is because bankruptcy isn’t a one-size-fits-all solution; rather it’ll help only those debtors who are in dire need of some breathing space.

The reasons for the widespread misuse of bankruptcy as a way to avoid meeting one’s own financial obligations is the increasing rate of unemployment, rapid economic disintegration and soaring medical expenses. However, the American Bankruptcy Institute has drawn up a list that discusses some legitimate reasons to
file bankruptcy:

  • Creditors have sued you.
  • Debt collectors driving you crazy with incessant calls or letters asking you to make the repayments.
  • You’ve got a huge number of unsecured loans. For instance, hospital bills, credit card bills, utility bills, etc.
  • Your creditors have won a judgment against you to garnish your wages.

How do you prepare yourself for bankruptcy?

Here are some of the important things that you need to keep in mind before you file bankruptcy:

a) Work with an attorney – The government has made bankruptcy laws all the more complex after every amendment. As a result, the current bankruptcy code is beyond the comprehension of a lay man. Due to this fact, debt experts suggest people not file bankruptcy without the assistance of a bankruptcy attorney. So, you should follow these advices and ask as many questions as possible to your attorney to find out about any other suitable alternative for you.

Moreover, you should enquire about the advantages of bankruptcy and the total costs to complete the same, if your attorney presses for bankruptcy as the only way out of debt problems.

b) Obtain a credit counseling certificate – Prior to filing your bankruptcy petition, it is mandatory for you to obtain a certificate of completion from a government-approved credit counselor proving that you’ve gone through the credit counseling session, as mentioned in the bankruptcy code. You can take this credit counseling session not more than 6 months before you file bankruptcy.

However, if you failed to submit the credit counseling certificate at the time of filing your petition, then your discharge may get delayed and you can get embroiled into a lot of legal hassles. So, it best not to wait for the last minute to complete the credit counseling course.

Lastly, the moment you file your bankruptcy petition and it gets accepted by the court, it is your liability to notify all your creditors/debt collectors about the same.

Debt impasse: Brace yourself before filing for bankruptcy