Bankruptcy is a bad choice. If you are thinking of bankruptcy, things must be going badly for you and you see no other way out. Before you stop paying your bills you should take these three important steps.
Write up a Bankruptcy Plan
This might sound a little crazy, but good business people always work with a plan. Successful businesses start with and constantly maintain a business plan. It could very well be that you in are this bad situation because you have not been working with a plan. Now is the perfect time to change your ways and start writing everything down in detail.
First of all draw up a detailed list of all your debts and assets. You are going to need this to present to your lawyer anyway. Use it first to analyze your situation with a fine tooth comb.
Ask yourself these questions:
- Where did all this debt come from?
- Are you in need of loan after bankruptcy?
- Are you surprised at the numbers, and if so, which part of it took you by surprise?
- What is your debt to asset ratio? Do you have more assets than debt, or more debt than assets? How much?
- Have you tried all avenues for refinancing?
- What could you sell off to change your financial picture?
Writing everything down in detail should give you a sense of relief. There it is in black and white. Hopefully you will have some realizations about how you got here, and what it will take to move forward. Looking at the numbers may get you started brainstorming on other options. Some of the biggest entrepreneurial breakthroughs have come on a really bad day.
Call and Interview Lawyers
Getting a recommendation on a lawyer is good, but not critical. Most people have experience with a very limited number of lawyers, so a recommendation really means that the guy they used turned out okay. A better reference is the lawyer’s credentials and years in business. Look them up in the Better Business Bureau.
The internet is a good place to find a lawyer. A good lawyer’s website will have lots of free information about bankruptcy on it. If they are serving lots of clients, then they will naturally use their website to educate their clients for an easier relationship. Things should be easy to find.
Search for the kind of bankruptcy lawyer you need. Do you need one who specializes in business bankruptcies? Or perhaps a bankruptcy and divorce? Do you have children? Lots of assets? No assets? Their website should help you determine if they have the specialization you need for your case.
Give a few chosen offices a call and chat with the staff. Most offices will offer a free consultation, but a lot can be discovered by speaking with the office staff. Are they friendly and helpful? Is access to the lawyer himself or herself easy or hard? Go ahead and ask the staff about the lawyers experience and how easy or difficult they are to work with. Direct questions will often take the office staff by surprise and they will answer honestly. If they hesitate, add a little red flag by their name.
Write Your Future Plan
The final step is to put a plan of action in place so that you never get in this situation again. You want to do this before you file a single legal paper because this step will help you walk into court with a clean conscience.
Bankruptcy is a second chance, not a license to start building debt again. You will be able to hold your head high if you have a definite plan to become a better contributor, to move forward positively. Having this in writing makes it real in the same way that writing out the bankruptcy plan in Step One made the debt load seem real.
Writing your plan in Step One should have opened your eyes to your true situation in black and white. In Step Three take off your victim blinders and have a good talk with yourself. Things are bad, yes. Circumstances happened beyond your control, yes. But here are some hard questions to ask:
- Why weren’t you prepared?
- In what ways did you overspend?
- Where is all the stuff you bought?
- What if you had bought assets instead?
Step Three should be brutal. It is okay to go through bad times if we learn from them. It is important that Step Three also be in writing. Some of this will be done with the help of your lawyer, but most of it needs to come from you. Which debts are you able to pay off, and which do you need to declare. How are you going to position yourself so you can earn more money in the future? How are you going to change so that circumstances don’t catch you up unaware again? How have you become better?
Make Your Choice
You are now ready to move forward. You have chosen your lawyer, gathered together your debt and asset lists, and written a plan for the future. Make an appointment for your free consultation, and gather any other papers they have asked you to compile.
At this time make your decision. Don’t drag it out forever. You should now have all the information you need to either move forward with the bankruptcy, or pursue another avenue. Whichever way you go, do it with the future in mind. Things always improve if we just keep plugging away!