Although the economy of Texas and the rest of the United States has improved in the last couple of years, many people are still feeling the effects of the recession. It is evident because the U.S. Courts System registered 1.07 million bankruptcy filings in 2013. The figure was however lower than the 1.22 million bankruptcies filed in 2012.
According to a study conducted by the Center for Consumer Recovery, 78 percent of respondents said that debt collection litigation was the primary reason for going bankrupt, while 72 percent cited excessive credit card debt as the primary reason.
The number of bankruptcy filings is declining steadily over the past few years. However, people who wish to come out of financial doldrums and get a fresh start must keep in mind some very important aspects regarding managing personal finances, assets and debts.
The five basic steps that people may take when they find themselves close to the edge of a financial debacle and the prospects of a subsequent bankruptcy looming large are:
- The person should be up-to-date with all debts that he or she has, even if the debt collector has stopped calling them.
- It is always better to talk to the debt collector without waiting for them to speak with the debtor. By doing so, a debtor gets a chance to explain why he or she is behind the predetermined repayment schedule and also explore the possibility of negotiating manageable payments until his or her financial condition improves.
- A debtor may also choose to seek help from a professional credit counselor or lawyer, who may be able to negotiate friendlier repayment terms with the creditor on a debtor’s behalf.
- A debtor may also choose to consolidate his debt and repay one lump sum amount that would pacify all of his or her debtors. By doing so, a debtor may be able to reorganize the debt and in the process save on interest charges.
- Last, but not the least, a person who is on the verge of bankruptcy, must not co-sign a loan, even if it would help a dear friend or family member, because by co-signing, a person automatically assumes the debt in case the borrower defaults on repayment.
Source: The Street, “5 Steps to Backing Away From Bankruptcy,” Brian O’Connell, April 8, 2014