When you are drowning in debt, bankruptcy is top of mind, especially when creditors bombard your mailbox, email and cellphone daily. They constantly remind you that you owe money. There is never a reprieve, never a moment of rest. However, you may think that you can dig yourself out, and you may be right.
Figuring out if you need bankruptcy is both a personal choice and a matter of financial and practical decision making. It should be made in consultation with your family and your attorney. However, this blog will at least give you some tools to know if you are in the financial red zone.
If you do not have a budget, make one
The first step is figuring out your financial picture. This means making a budget. You need to know all of your debts, income, bills, etc. You need to grasp the full scope of your financial life and what you owe every month. Even those debts you may not be paying on, you need to account for those in your Brooklyn budget.
Is it negative?
Do you have more outgoing than incoming? If so, you may need bankruptcy. However, before we go down that path, let us see if we can get you back on track first. Cut your spending. Lock away your credit cards.
Everything should be paid in cash or through your debit card. However, do not cancel your credit cards because this will destroy your credit score and reduce your ability to borrow, should you need it. Downsize as much as it possible. Sell everything you can, and get rid of any luxury items, like cable, dining out, alcohol, cigarettes, etc.
You may have to skip gifts for a few holidays to get back in the black, and if so, that is okay. Remember, you just need food, utilities, shelter and a car (nothing fancy).
How do your finances look now?
If your Long Island budget is back in the black, and it looks like you will be able to pay your debts in a reasonable amount of time, bankruptcy may no longer be needed. However, if your budget has you paying everything off in 30 years and paying six-figures in interest, maybe bankruptcy is still the better option.
If the finances are not better, the next step is income
Finally, if your finances still do not match, the next step is to increase your Westchester County income. This can be done with a second job, side hustles, a third job, etc. The goal is to maximize your earnings. Again, if these are not possible, you may consider Chapter 7 or 13 Bankruptcy.