Tuesday, May 21, 2013


Here are 15 Tips to help you avoid filing bankruptcy. It took me 30 years to learn what I will now teach you in 5 minutes:

1.    Don’t make your happiness depend on buying things that you can’t afford.  To be more happy and healthy, try eating healthy, exercising and enjoying time with friends and loved ones.  Studies show that buying things does not work as well as you might think in terms of making you happy.  Sharing experiences with loved ones and friends does help.


2.    Avoid buying a car that you cannot afford.  Avoid car payments that you cannot afford.  Car repossessions almost always are accompanied by a large balance due that the lender sues for and gets.


3.    To the maximum extent possible, use debit cards, not credit cards.  If you don’t have the money now, you can’t afford it.  This is really an extension of #1 – don’t buy things that you cannot afford.


4.    If you have a job, be a good employee.  Many of my clients find that losing their job is what drives them into bankruptcy.  Being unemployed makes it harder to get the next job and harder to pay your bills.

If you can, get a job that also provides good health insurance.  Health insurance is expensive and even more expensive for individuals than for group plans.  Many of my clients have large medical bills as a factor that contributes to their having to file bankruptcy.


5.    When times are good, save money for a rainy day.  Don’t assume that your income will always continue at its highest level.


6.      Buy and learn how to use personal financial software like Quicken or QuickBooks.  It gives you a great way to see, understand and manage your finances, and it helps motivate you to make more money and hold your expenses down.  What you measure is easier to improve.  If you do not pay attention to something, it usually does not get better by itself.


7.    Don’t personally guarantee debts for anyone.  In my experience, people often get sued for debts that they personally guaranteed for others.  Personally guaranteeing debts looks easy at first – just sign here –  but then ends up very hard when you get sued.  Personal guarantees alone can be enough to force you info bankruptcy


8.    If you own a business, avoid signing long term leases.  One broken lease can drive you into bankruptcy.


9.    If you have employees, use a payroll tax service.  Don’t risk having the IRS come after you for the unpaid trust fund portion of your payroll taxes.  If you cannot afford the payroll tax, you cannot afford the employee.


10.  File your tax returns on time.  If you don’t, you will incur substantial penalties and risk having the IRS create returns for you that invariably result in you owing much more to the IRS.


11.     Limit your student loans.  Think about your realistic prospects for a job with and without the education that you are borrowing money for, and what your income is likely to be.  Many people come to me with student loans of $100,000.00, $200,000.00 or more.  These loans can almost never be discharged in bankruptcy.  Like personal guarantees, signing for a student loan seems easy at first but can make life very difficult in the end.  Think carefully about whether or not the student loan will increase your earning potential.


12.    Avoid gambling and drugs – either one can lead to bankruptcy.


13.   Cut Personal Expenses. If you really care about avoiding bankruptcy, you can sacrifice some luxuries, such as eating out, buying new clothes or getting premium cable or cell phone service, for a while. Also consider moving to a less expensive home or renting out a room in your home.


14. Before you decide to file bankruptcy, get expert free advice from an expert bankruptcy attorney to see if bankruptcy is  your best option.  You may be able to avoid bankruptcy by simply waiting to see what happens.  If no one is suing you, you made decide to wait and see what happens next.  Don’t Panic. 


15.   Last words:  There is absolutely nothing to lose by getting a free consultation with a certified specialist in bankruptcy law to see if bankruptcy is right for you.