Take Six Bankruptcy Prevention Pills And Call Me In The Morning

People who are behind with bills, but not yet overwhelmed by debt and by collection calls may be able to get by without filing bankruptcy, advises the nonprofit group ConsumerAction.org. Actually, having served as an Indiana bankruptcy attorney for almost twenty-five years, I agree.

Ironically, filing bankruptcy may actually improve your credit score in the short run. Smart Money points out that most folds who consider bankruptcy already have late payments and high balances on their record; discharging some of those debts can wipe the slate at least partially clean. Still, the bankruptcy will continue to appear on the credit record for seven to ten years. All other factors being equal, the bankruptcy can lower the overall credit score by 200 points or more.

Consumer Action suggests trying these strategies:

Find ways to earn extra money.
Keep a budget.
Downsize your lifestyle, even to the point of selling your home or car.
Pay as you go, using cash or debit, not credit.
Comparison shop, buy generic brands, buy in bulk.
Start an emergency savings fund.

FindAdvice.com adds:

Pay your bills on time (payment history is 35% of your credit score)
Pay down debt
Don't close old accounts (that lowers available credit, making the outstanding balance larger by comparison).

What I want to add to the list is a very strong warning about credit repair scams. The office of the Indiana Attorney General is investigating many businesses that promise to erase negative information from one's credit report. (The last thing you want is to have your credit record hurt be becoming an identity theft victim!)

Consumers facing mounting debt need to explore all their options, and they need to do it as quickly as possible. Filing bankruptcy may not turn out to be their best option, but a thorough legal consultation is almost always the best way to uncover what is.

It's not uncommon, in fact, for me to conclude an exploratory bankruptcy consultation meeting by saying, "Try these bankruptcy prevention strategies and call me in the morning…a couple of months from now!"