In times of financial distress, many Americans may consider filing for bankruptcy. Despite its negative connotations, bankruptcy offers citizens a path to recovery after an unfortunate event. Many people need bankruptcy after suffering a medical emergency, losing their job or both.
However, before declaring bankruptcy, applicants must complete a financial counseling course. These courses explore a person’s income, debts and spending to pinpoint problematic areas and offer alternatives to bankruptcy. Many of these techniques can help families fix their financial problems without declaring bankruptcy.
Financial counseling will explore other methods
Virginia law requires bankruptcy applicants to meet with a professional credit counselor who will explore recovery alternatives to bankruptcy. These sessions educate people on money-saving and budgeting techniques that may curb problematic spending and help people avoid bankruptcy.
Alternative financial solutions include:
- Credit counseling: Some credit counselors may recommend continued sessions to help people manage their finances. Often priced on a sliding scale to account for a person’s financial situation, counselors explore basic tactics like consolidating credit card debt to its lowest annual percentage rate (APR) or offer information on debt management programs and settlements.
- Deliberate budgeting: Many financial problems stem from unchecked spending and growing debt. Counselors can recommend and help build budgets that rein in excessive spending. Following a strict budget takes time to get used to, but discipline can go a long way. Counselors may also recommend a temporary second job to get ahead of debt.
- Settling debt: Bankruptcy forgives much of a person’s debt, taking promised money away from creditors. These financial institutions would prefer their customers to pay their debts back, so many are willing to negotiate. A lawyer can work with financial institutions on a debt settlement program, setting realistic expectations and timeframes.
After exploring these options, counselors may still recommend bankruptcy. A person’s estate size and value determine eligibility for Chapter 7 or Chapter 13 bankruptcy.
Considering bankruptcy? Secure sound legal advice
People considering filing for bankruptcy to fix their financial situation find more success consulting with a local attorney familiar with Virginia bankruptcy laws. A lawyer can recommend a financial counselor, protect one’s legal rights and work with creditors on a settlement agreement.