Although most people want to avoid going bankrupt, it might be a necessary legal procedure that can be highly advantageous in the long run. In 2016 alone, nearly 14,000 people filed for bankruptcy, taking into account every type of bankruptcy, in Indiana. That information comes from the United States Bankruptcy Court for the Southern District of Indiana.
Filing for bankruptcy is a big decision, one a person should not make lightly. However, if a person believes it truly is the best course of action, and it is recommended by a legal professional, then it is worth pursuing. Before submitting all the paperwork, people should follow a few steps first to ensure this process begins on the right footing.
Track monthly expenses
Before filing, people need to know what they are spending money on each month. This helps determine whether Chapter 7 or Chapter 13 bankruptcy is ideal. It also gives people an opportunity to see if there is any wasteful spending to eliminate before pursuing bankruptcy.
Analyze debt
Next, a person needs to see what type of debt he or she has. Bankruptcy can discharge certain types of debt while keeping others intact. For example, if a person has child support payments to make that are causing a certain amount of debt, then bankruptcy will not discharge that.
Avoid common pitfalls
There are certain actions people do before filing that are ultimately detrimental in the long run. These actions include:
- Spending even more money on credit cards, maxing them out
- Damaging property, such as a car, the person may need to forfeit to creditors
- Hiding assets
- Giving property, such as a house or car, as a gift to family members or friends
Finally, before committing too much to the bankruptcy process, it is important for a person to see if he or she is even eligible. Not everyone qualifies, so take a look at the paperwork to see what a person needs to do.