Personal Bankruptcy

Learn How To Avoid Personal Bankruptcy By Not Over Loading Your Personal Finances With Too Many Bills

Avoid the financial pitfalls with a written plan

A ship's captain cannot see his destination for fully 99.99% of the voyage. But he knows if he does certain things in certain ways, day in and day out, his vessel and its cargo and crew will arrive to port safely and on time. He's working from a navigational chart; a written plan. That's what you have to do in order to avoid the financial storms and economic tsunamis life sends at you. You have to take the time to sit down and map out a financial plan; a financial navigational chart.

Begin with a budget

This is the first and most simple step toward taking control of your finances. A realistic assessment of how much money you bring in and how much goes out is key. Just take a look in your checkbook for the past three months. After listing all of your income sources, prepare a list of your "fixed" expenses like mortgage payments or rent, car payments, etc. Next, list the "variable" expenses such as food, clothing, utilities and fuel. Make sure to write down everything, even if you have to establish a "miscellaneous" category for items that really don't fit anywhere else. This helps track your spending patterns. Once you've listed all of your expenses and income and categorize them, set priorities. Establish what items are important and what items you can live without.

Steady the course by sailing in predictable seas

You may want to contact your utility companies to see about setting up a "budget billing" plan for each of your utilities. Most utility companies will assess your previous year's usage and determine an average monthly amount, then set your monthly bill for the next twelve months at a specific rate. This will help you better plan your budget without so many "surprises" each month.

Establish a dialogue with your creditors

If you're having trouble making ends meet contact your creditors immediately. If you don't, they'll think you've given up and be forced to turn your account over to a debt collector. So, before it gets to that point, call and explain what difficulties you're having and try to work out a modified payment plan that reduces your payments to a more manageable level.

You do have rights

If you find yourself too far gone there are options long before bankruptcy. First of all, understand the Fair Debt Collection Practices Act: a federal law that dictates how and when a debt collector may contact you. A debt collector may not call you before 8 a.m. and after 9 p.m. If your employer doesn't approve of collectors calling while you're at work, the collector must adhere to your employer's wishes and not call you during working hours. Collectors may not harass you, lie, or use unfair practices when they try to collect a debt. And they must honor a written request from you to stop further contact.

Simply write a letter to the debt collector and state that he or she is to no longer call you under provisions of the Fair Debt Collection Practices Act. You should then provide them with a mailing address to which all correspondences may be sent. Most people use a P.O. Box. You may find that before long, especially with an unsecured debt, debt collectors are willing to negotiate a pay off of your debt as low as 30% of the original amount. However, keep in mind most states allow additional fees to be applied over time which can raise you are final pay off to the level it would've been to begin with.

Saving the homestead

A few states, such as Texas, protect your home, even in personal bankruptcy. But if you live in a state where your home can be repossessed as easily use your car and if you and your lender cannot work out a plan, contact a housing counseling agency. Many offer help to any homeowner who's having trouble making mortgage payments. Call the local office of the Department of Housing and Urban Development or the housing authority in your area to find a legitimate housing counseling agency that can help you.