We all know we should save for a rainy day. Money problems can happen to anyone, no matter how stable their life appears.

And sometimes the troubles just keep on coming, beyond what you had saved up for them. What then?

What you do depends on how bad it gets. Sometimes things are bad enough that bankruptcy is your only answer. Given how much more difficult that has been made in recent years you’re best off trying to avoid it, but there are times that it is the only option that will get you out of financial trouble.

But whether or not bankruptcy is your answer, you will need to rethink your current financial plans.

Cut Back 

Take a look at your current spending habits. If things have been bad a while, hopefully you have long since started cutting back on luxuries. If not, get going on that, and yes, cable television and even internet access can be considered luxuries.

Look at where you live. Can you really afford it now? It may be a good time to move to a smaller home or apartment, and use the extra money to help with the bills that are giving you so much trouble.

What about your job? Is it really enough? Do you have the skills to get something better? What about the time to take on a second job to help make ends meet. Even if it’s flipping burgers, a second job will help.

Where do you shop? If times are tights, now is not the time to try to keep up with current fashions. When you absolutely need more clothes, thrift and resale shops are generally better choices than department and specialty shops. Just look around and find out which ones in your area tend to have the best selection.

Work on Your Debts

But of course spending less money only does so much good if you aren’t getting rid of your debts.

Start by talking to creditors and seeing what can be arranged. If smaller payments can be permitted it will extend the life of the debts but help keep you from falling behind completely. Ask for lower interest rates too. It could happen.

Pick a debt and focus on paying it off, paying just the minimum on the rest. Once it’s gone, that’s one less bill to worry about. Pick another and do it again. Repeat as necessary.

Technorati Tags: saving for a rainy day, debts, personal finance, debt, credit, money

A bankruptcy lawyer can be a big help. Filing incorrectly can limit the benefit you get from bankruptcy. Knowing which kind of bankruptcy to file and how to protect your most important assets.

The Consumer Rights Group website offers some basic, useful information on bankruptcy. They also have an easy questionnaire that can be evaluated for free by a local attorney. If you think you’re going to need legal help with a bankruptcy, finding an attorney is just one more source of stress. Filling out a questionnaire and letting one come to you can be a bit of a relief.

Of course, you should always avoid bankruptcy if at all possible. Paying your bills on time and being financially responsible is the best choice. But sometimes life takes a turn that makes paying your bills impossible, and bankruptcy can be a huge relief.

Sounds painful, doesn’t it? Filing bankruptcy is not and should not be an easy choice.

However, you need to be careful about when you file. Bankruptcy or even just starting to file for bankruptcy will impact your credit for years.

Yes, you read that right, starting to file for bankruptcy and then changing your mind will impact your credit history. So be certain first that it is something you need to go through. Don’t get things started and then realize you didn’t need to do it after all. There’s no need to take that kind of hit to your credit score.

A bankruptcy will clear most of your debts, but some kinds of debts will not be cleared, and you will still need to pay them. In recent years it has been made more difficult to file for bankruptcy, and you are left responsible for more of your debts in many cases, even unsecured debts such as credit cards. If it is possible for you to pay back your debts on your current income, you may be required to do so under current bankruptcy laws.

Bankruptcy means that you will lose many of your assets, so as to pay back as many debts as possible. You will be allowed to protect a certain amount, but not everything. The amount you are allowed to protect depends upon the state you live in.

With bankruptcy being harder to file, you need to be sure that you will benefit. Being freed from the constant calls from creditors is a wonderful thing, but if you are going to be responsible for all your debts anyhow, there is little reason to file for bankruptcy. You may be better off negotiating a manageable repayment schedule.

Chapter 13 is popular for individuals because it gives a repayment plan, so that you can protect more assets. Depending on what you earn, you will be given a 3-5 year repayment plan. Chapter 13 has the advantage that you don’t necessarily lose your home, so long as you can continue to make mortgage payments and make up the missed ones.

Chapter 7, on the other hand, requires liquidation. It’s a much less pleasant option for most people. How much you can protect depends on where you live, and how far you need to liquidate may depend on the debts you need to repay.

Do everything you can to estimate the benefits you may receive by filing bankruptcy. You need to know that you will receive the relief you expect. It is far better to check beforehand than to change your mind halfway through, failing to get the relief from bankruptcy, yet still suffering the consequences in your credit history.

Technorati Tags: filing bankruptcy, bankruptcy benefits

For many people, filing for bankruptcy is one of the most painful emotionally things they will have to do in their lives. It may mean the worst of your bills will go away, but it also means that you will have trouble getting credit for years. It may mean losing your home or your car. It’s not pleasant even when it’s the only way out.

But once it’s done and over with it is time to start trying to get past that and rebuild your life and credit. You will just have to find banks that can work with you.

In many cases this means getting a secured credit card or an unsecured one that doesn’t do a credit check. Whichever you get, make sure that you make your payments on time and regularly. It will take a couple years of this to prove that you are again credit-worthy, and you will probably be paying higher interest rates and/or fees for these cards, but over time you will come to the point where you can get regular credit cards again.

But more important is the impact a bankruptcy can have on your personal relationships. It’s a major strain on them. Your money troubles do not vanish with the filing of bankruptcy. The things you have to give up as a result, the changes you need to make, the emotional lows of going through a bankruptcy are extremely hard on relationships.

Getting past these is in many ways harder. You may have to seek counseling. You will certainly need to talk about changing any shared habits that contributed to the bankruptcy. And you will need all possible emotional support.

If you have to hunt for work, a bankruptcy can make it harder to find a job, as many employers check credit histories. There is a feeling that people who are not responsible with their credit may not be as good of employees. Even if the bankruptcy was due to factors beyond your control, such as medical bills, this is something you may have to face.

Make a plan to improve your spending habits, especially any that were major contributing factors to the bankruptcy. Learn to live without buying so much stuff. Eat out less often. Find cheaper forms of entertainment.

It will take two years or more of work to start proving yourself on your credit history, and it will be years before the bankruptcy comes off your record. The more serious you are about showing that you have learned your lesson and that you can now be trusted, the sooner you can rebuild your credit.

Technorati Tags: personal finance, life after bankruptcy

Bankruptcy has become increasingly common in recent years, so common, in fact, that the Senate has passed a bill to make it more difficult to avoid paying your debts by filing bankruptcy.

Many people have come to see bankruptcy as a means to get out of debt and file for bankruptcy much too freely. This has become a serious problem for credit card issuers.

Some feel that this will create problems for people who are hit by serious financial problems they cannot get out of, such as large medical bills or other major events in their lives that cannot be avoided by good planning.

The bill requires more unsecured debt, such as credit cards, to be paid off in a bankruptcy. There is concern that this bill leaves it open for wealthy people to still keep their homes while middle class families have more to lose. Some say that this bill erodes the protection the government gives middle and lower income families in times of need.

It has been shown that most bankruptcies are due to major financial misfortune, so it is possible that this bill will cause more harm than good. However, amendments trying to protect those in such situations were voted down.

While there is no doubt that there are those who abuse bankruptcy and decline to pay what they could of their bills, this bill does not properly address such people. Instead, it fails to protect those who are truly having financial problems and would have the most trouble working with a payment plan.