Financial management is a life skill that can’t be overstated. Poor financial management mixed with unexpected tragedies can leave you with a mountain of debt that keeps piling up. In this blog, we’ll talk about some common mistakes that can lead to bankruptcy and how to avoid them. We’ll also talk about how filing for bankruptcy isn’t always a bad idea.
If you have any more questions about bankruptcy or the bankruptcy process, call the Alabama bankruptcy lawyers at Eric Wilson Law. Bankruptcy may not be the first choice for many people, but it can offer you a fresh start and help you reduce a significant amount of debt. Schedule a free consultation with a top-notch bankruptcy attorney like Eric Wilson by calling 205-349-1280 today!
Common Mistakes to Avoid
You may have seen plenty of articles touting the “seven bankruptcy mistakes” or “seven mistakes to avoid in bankruptcy.” Those all focus on mistakes people should avoid after filing for bankruptcy. But what steps can you take to avoid bankruptcy? Unfortunately, bankruptcy is not always entirely avoidable. People can do all the financial planning possible, but one severe financial setback like medical debt from a health emergency or an unexpected job loss can ruin all your hard work. Repaying debts can be difficult when the debts are never-ending. Some of the more common mistakes to avoid are racking up credit card debt and poor financial planning.
Overspending on Credit Cards
A credit card is a valuable asset that can help you in an emergency. Many credit cards also have benefits like points, cash back, or airline miles. Unfortunately, credit card debt can quickly get out of hand. It’s much easier to swipe a piece of plastic and promise to pay the bill later. According to a report by Experian, the average American has over $5,000 in credit card debt. Not only does overspending make your credit score drop, but you often end up paying significantly more in the long run. Credit card balances should stay below 30% of the credit limit. Cash advances on a credit card can also result in higher interest rates. The best practice is to pay credit card debt as soon as possible.
Misuse of Savings
Using your savings or dipping into retirement accounts early for everyday expenses can land you in financial trouble. Misappropriating savings accounts for non-emergency expenses can be an indication that you are living beyond your means.
Living Beyond Your Means
Living beyond your means essentially means that you are living a lifestyle that you can’t afford. If your monthly expenses are more than you bring home, you are likely just pushing yourself into more and more debt. Many people make the jump to buy a new house, get a new car, or get the latest gadgets without making sure they can sustainably keep up.
Tips to Avoid Bankruptcy
Many people file bankruptcy as a last resort after all other options fail. Many don’t realize that bankruptcy can actually save them a lot of money and stress in the long run. Bankruptcy has a major impact on your credit record, so people often take out more credit cards. Some people end up with multiple credit cards, a second mortgage, or even drain their retirement account to pay off their debts. Fortunately, there are other ways to avoid bankruptcy. When you work with a qualified bankruptcy attorney like Eric Wilson, you can make a plan for consumer debts incurred and plan for your future.
Debt problems often don’t originate from a single ordinary creditor. Consolidating debts into a single monthly payment can help lower the interest rate and help you pay off the debt. A single payment can lower the risk of missing a payment, making a late payment, and having to pay late fees. All of these mistakes can leave negative marks on your credit report.
Low credit scores can severely limit the amount of credit available to you. Poor credit scores can also make it harder for you to find housing and even better job opportunities. Credit scores can directly affect interest rates as well. Credit counseling services can help you build your credit score.
If you are in over your head with different creditors, it’s possible to negotiate the debt. At Eric Wilson Law, we can help you settle your debt for a percentage of the original amount. Some creditors are willing to work with you and set up a new payment plan with a lower monthly payment and an extended payoff period. Other creditors may be willing to wipe out a portion of the debt if you can make a large payment on the account. Whatever the case may be, the team at Eric Wilson Law is ready to help.
Benefits of Bankruptcy
Many misconceptions about bankruptcy are floating around via word of mouth or on the internet. Bankruptcy may impact your credit for a number of years, but so can missed payments and debt. Bankruptcy benefits include getting a fresh start and getting out from under a mountain of debt. Many of the reasons so many people are in debt today have a lot to do with forces beyond their control. There’s only so much you can do to prepare for the unexpected. Eric Wilson is a bankruptcy attorney that can help you get back on track.
Bankruptcy filings can help people stop foreclosure on their home, stop creditor harassment, and discharge unsecured debts.
Is Filing for Bankruptcy the Right Choice?
Filing bankruptcy is a big decision. If you are considering filing bankruptcy, you probably have a million questions. What chapter should you file? What can you buy before filing? What can you not buy before filing? Should I pay my family members back before court? What about repaying friends? Can creditors still call me and demand debt after I declare bankruptcy? What if I file the wrong chapter? How much power does a bankruptcy trustee have?
At Eric Wilson Law, our experienced team can help you through every step of the process. From the initial negotiations to the final court proceedings, we’ve got your back. We can help you determine if Chapter 7 or Chapter 13 is best for you.
A Bankruptcy Lawyer Can Help You Avoid Common Bankruptcy Mistakes
At Eric Wilson Law, our Tuscaloosa bankruptcy attorneys are ready to help you. We are a debt relief agency that helps people file for bankruptcy relief under the Bankruptcy Code. We can help you take steps to avoid a bankruptcy case, or we can explore bankruptcy options for you depending on your case. Establishing an attorney-client relationship with an experienced debt relief attorney can help move your case forward. For more information about bankruptcy court and how to avoid it, call us at 205-349-1280.