Filing for Bankruptcy: Here’s What Should You Do Before You File

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Filing for Bankruptcy: Here’s What Should You Do Before You File

Bankruptcy is typically considered as a last resort if you are unable to pay your bills and are deep in debt. Before you decide to file for bankruptcy, weigh your options carefully because bankruptcy will have a lasting impact on your credit and could disrupt your financial plans.

Here are some things to do before you decide to file for bankruptcy.

Negotiate With Your Mortgage Lender

Rather than wait for a bankruptcy settlement to take place and risk the chance that they will receive nothing at all, some credits may agree to accept your reduced payments over a long period of time. However, you have to make the first move to negotiate your debt. Don’t expect them to reach out to you.

If you are behind on your mortgage, call your loan servicer to get more information about your potential options. You may be able to obtain forbearance, loan modification programs, or even lower your interest rate for the remaining portion of the loan.

Contact the IRS for Help With Tax Debt

Even tax agencies such as the Internal Revenue Service are willing to negotiate if you owe back taxes. In fact, you may be eligible for an offer in compromise in which the IRS agrees to accept an amount lower than the taxes that you actually owe. The IRS also offers payment plans to eligible taxpayers which will allow you to pay your tax debt over time.

Consult With an Attorney

If you are concerned about your bank accounts and any assets that might be frozen as a result of your outstanding debts, consult with an attorney. It is very important that you do so before you take any action regarding transferring any assets to other family members or withdrawing funds from your retirement accounts to cover debt. Make sure to share any lawsuits that have been filed against you with your attorney as well.