Many times, during an initial consultation, I will hear the words, “Gosh, I would have come and seen you earlier.” And, I usually agree. Even if a bankruptcy filing is the last step you ever want to take (who would WANT to file for bankruptcy?), you should consult with a professional as soon as financial trouble hits. If you are having trouble paying your bills, speaking with an experienced bankruptcy attorney can help you get a strategy together to avoid a filing. If a filing is the best course, speaking to an attorney early can help you make the most out of the available debt relief.
Here are some of the strategies I have seen clients employ when finances get tight:
1. Selling an asset. This solves problems if the property is a non-exempt asset which a potential client can no longer afford to keep. For example, if you have a rental property which is losing money, it might make sense to cut your losses. Talking to a bankruptcy attorney about this strategy would help make sure the property is non-exempt.
2. Reducing expenses. This may be easier said than done. Interest payments on debt often are the reason people cannot live in better houses, eat better food, and yes, take a vacation now and then. Talking to a bankruptcy attorney can help you determine where it may be possible to decrease what you are spending each month.
3. Settling with creditors. This option is risky because often times doing so means taking exempt assets to pay off debts which would be extinguished with a filing. Before making this tough decision, it is wise to understand the benefits and problems with doing so. For example, like bankruptcy, settling with a credit card company will damage your credit.
4. Borrowing from family and friends. This can help if there is a single problem bogging down a budget, but often is not used appropriately. Borrowing to stay current on credit cards, for example, is not something I generally advise.
Whether applying for bankruptcy relief is appropriate or not, speaking with someone experienced with your financial troubles is a good idea. It could help you avoid bankruptcy.