First Things First When You're In Over Your Head In Debt

April 23rd, 2009 by Reed Allmand

In March over 121, 000 Americans filed for bankruptcy, that’s 41 percent increase from 2008. When you’re drowning in debt and see no way out bankruptcy is most likely the best option. But there are few housekeeping items to consider before you file bankruptcy so that you are in the best position to protect your most valuable assets.

1. Take a look at your budget. Write everything down–all bills and how much they cost you each month. This budget will be helpful in your pre-bankruptcy planning.
2. Separate the expenses that are essential from the expenses that are luxuries. For example, you need a place to live so you must pay your rent or mortgage. On the other hand, you might not need internet access or cable television or the luxury boat you’re renting.
3. Expense items that are not essential should be cancelled immediately.
4. If, after eliminating non-essential expense items from your budget you find that you are still unable to afford the basics, (rent/mortgage, utilities, car payment) immediately prioritize your debts putting the most important items first. If you have credit card debt and must choose between paying for your basic living expenses and making credit card payments, choose to pay the basic living expenses.
5. Your house and car loan payments are essential. If you can, continue to pay your car and house payments if you plan to keep these assets during your bankruptcy. If you’re filing Chapter 13 Bankruptcy, the bankruptcy court will include any delinquent mortgage or car payments in your repayment plan.