Knowing where to start is often a daunting matter, especially if you are already in debt up to your eyeballs and can’t see the forest for the trees. Don’t let yourself succumb to that feeling of worthlessness. No matter what situation you are in or are facing, a personal budget is one way to take a firm hold of your finances and to deal with whatever issue you may be facing.

One important aspect of any budget is the level of income versus the level of expenses, and although I understand that many people have credit cards to deal with urgent essential costs, most people would be far better off without the cards, and visiting a lender offering pay day loans instead, when the need arises. Credit cards and lines of credit are by far the most costly of all debt that we as individuals incur. Sure the car and the house may be larger debts but the cost of that debt is far less than the cost of inefficiently operating a credit card.

We have been lulled into this false sense of security with credit cards, and out of that has evolved a generation of people who believe that a plastic credit card is an essential part of everyday life. In fact at one time not so long ago, it was not fashionable not to have a credit card. All of these people who have them have been manipulated by the banks and lending institutions that the credit card is the saviour of all their problems, and most have believed that. If you look at the statistics of how many people owe, and how much is owed on credit card debt, you would easily see that most countries would be bankrupt if everybody in debt decided not to pay. That is a very worrying concern.

So for me, the first piece of advice to those who are establishing a personal budget of their own is, “do away with the credit card“  if you can. If you have a reasonable income and few creditors, a credit card is not your best friend, but very well could be your worst enemy. By continuing to use a credit card you are simply saying “I want the things I can’t afford, and I am happy to pay someone a lot of money for the privilege of having them now”, and to me that is ridiculous. Credit cards will ruin even the best personal budgets, unless you are able to strictly monitor and use the card according to the terms of the lender.

While there are many types of bankruptcy out there, the most commonplace are chapter 7 bankruptcies and chapter 13 bankruptcies of the bankruptcy code.

Chapter 7 is the most common for the individual. It is the complete erasing of qualifying debt. The debtor is then released from all repayment obligations. But chapter 7 bankruptcies are not to be taken lightly.

While giving you an immediate fresh start in repairing your finances, it remains on your credit report for 10 years.  You will be looked at as a high credit risk and financially irresponsible.

Chapter 13 is less harmful to your credit. Though there are still marks against you, since you will be working to repay your debts on a payment plan, you do not look like you are financially irresponsible, though you are still considered a slight credit risk. Also, your qualifying assets will not be sold with the chapter 13 bankruptcy like they would in the chapter 7.

In 2005 an act passed legislation that now makes it more difficult for individuals to receive a chapter 7 bankruptcies. There are now terms to be followed such as pre-filing credit counseling and post-filing financial education.

So when considering your file for bankruptcy, it is important to weigh the sides between chapter 7 and chapter 13. Which one will do you more harm than good when it comes to solving your financial problems?

If the right steps are taken from the beginning, you can keep yourself and your family out of financial trouble and away from bankruptcy.

First off, start by educating your children. Many of us growing up weren’t presented with the tools and knowledge to establish and maintain good credit and keep away from the scare of bankruptcy.

Parents need to be honest with their children about finances. Teaching children that hard work, no matter the job, has its rewards and if you spend on a budget, there will never be a fear of bankruptcy.

Establishing a budget is also key in the prevention of bankruptcy. You cannot spend what you don’t have. Many people today have multiple credit cards and are in essence spending money they don’t actually have, plus more for interest.

So much so that people are paying off credit cards with credit cards and causing a terrible chain reaction. Spend what you can afford, after the bills are paid.

But you will want to make sure you have something socked away for an emergency. Something along the lines of two thousand dollars is a good base to have stored away for an emergency.

It is another step to take to keep out of financial trouble. Probably the most important thing though is to watch your bank account. Don’t get yourself into a situation where you are overdrawn.

The fact is more than a third of adults rely on their banks overdraft to keep them going on a month-to-month basis.  Such actions are ones that lead individuals on a path to bankruptcy.

The debtor must get counseling and certification from a non-profit credit-counseling agency before the forms can be filed for your bankruptcy.

This usually entails one or more counseling sessions and when completed, certification so you can proceed with the bankruptcy filing.

There is work you need to do even before you get your pre-filing credit counseling certification. There are forms you will need to have filled out during your sessions.

One is the income certification form. This exposes your income and includes a fee schedule. There is also a budget form that will need to be filled out. It is pretty self-explanatory.

With these forms complete, and your certification now complete, you will need the non-profit credit counselor to fill out your affidavit and agreement for credit counseling. Your attorney, along with a copy of your state ID, must also notarize this form.

All of these forms must be presented to the court clerk before you begin to file your bankruptcy paperwork along with a notable fee.

Many companies offer this service not only in their office, but also online with one-on-one telephone counseling sessions. Once you have completed these steps, you are ready to file the paperwork with your bankruptcy court.

Be prepared though because following the court process, there will be another counseling session you must attend. This time it is a financial planning session, which will help you get back on track to a financially better future.

Common questions debtors have are usually about keeping current credit cards, establishing new credit and buying a home.

If money is owed on a current credit card, then it must be listed in your bankruptcy forms as a debt. These forms are filed under penalty of perjury and if fraud is detected, your bankruptcy case can be discharged.

Also perjury is a federal crime punishable by a fine and time in prison. Neither circumstance is ideal for someone trying to repair his or her credit. But if nothing is owed on the card, then it does not have to be listed.

But this doesn’t necessarily mean you will get to keep your card. Your company may cancel your account as a precautionary measure.

Credit is now available to the recently bankrupt. Though most will find high restrictions such as lower limits and higher interest rates.

But it is not necessarily a good idea to start up right away with those credit cards. Usually it is what gets people into trouble in the first place. It is also important to avoid credit repair scams.

After filing for bankruptcy, many people are afraid they wont be able to buy a home for 10 years while they have a history of bankruptcy on their credit report.

Usually 18-24 months within a bankruptcy discharge, debtors can qualify for a loan on the same terms as if they had not filed for bankruptcy.

The debt is usually paid over a three to five year period.  This chapter is usually chosen by those who have a regular income and who do not wish to deal with the new laws of chapter 7 bankruptcy codes.

Also known as the wage earners plan, chapter 13 bankruptcies enable debtors to pay off part of the debt they have incurred.

While it is not as good as being able to work something out with your creditors and arrange payments individually or through a debt consolidator, it does show some financial responsibility and the debtor’s willingness to make up for their mistakes.

Chapter 13 bankruptcies act as sort of a consolidation loan in itself. Because the debtor is making payments on the owed monies, it does not have such a bad impact on the credit reports. But the individual does not have direct contact with the creditors and payments are distributed amongst them.

To be eligible for the Chapter 13 bankruptcy an individual,  even if self-employed must have an unsecured debt of under $307,675 and secured debts must be under $922,975.

No debtor may file for chapter 13, or any bankruptcy chapter during the preceding 180 days of a previous bankruptcy petition was dismisses.

There are fees that must be paid also when filing for bankruptcy, even the chapter 13 code. The courts charge a $235 case filing fee and a $39 miscellaneous administrative fee. These fees must be paid when filing unless with the courts permission, it can be paid in installments.

The main purpose of bankruptcy is to give honest debtors a fresh start, clearing most debts and discharging debtors from legal obligations and providing the courts with non-exempt assets to be distributed among the creditors.

Originally a bankruptcy case is started with the filing of a petition. This petition declares the debtors financial information and states his intent to declare bankruptcy.

Most individuals, who file for bankruptcy, file a chapter 7. This is a liquidation bankruptcy. This is where the debtor’s non-exempt assets are sold off and distributed on the basis or priority amongst the creditors.

Bankruptcy shouldn’t be the first step though. Many people who find themselves in trouble immediately go to bankruptcy.

First talk with your creditors and try to work something out. They would rather take payments than deal with the paperwork and money that goes into legal action that they will need to take.

Next, speak with a non-profit debt consolidator. Many people who think they are deep in trouble are only borderline, and with some help and creative financial dealings, debts can be paid off without the initiating of a bankruptcy case.

When all else fails, a bankruptcy lawyer should be sought.  They are experts in the steps that need to be taken from filing the paperwork to the court hearing to determine if the bankruptcy filing is legit. False filing for bankruptcy is a crime and punishable in court.

Many people spent years being careless with their credit and debts because it could be fixed with a quick filing for bankruptcy.

Now that the law has changed, there are more restrictions for filing a chapter 7. Before the 2005 revision, filers could choose which code they wanted to file under. Income did not matter.

One of the biggest changes is that now those with a higher income will have to file under chapter 13 and therefore pay off some of their incurred debt. The law also imposed new restrictions on bankruptcy lawyers. It may be tougher now to find a lawyer who will represent you in a bankruptcy case.

In addition to the new income restrictions, there is also mandatory counseling that debtors must complete before and after filing for chapter 7 bankruptcy.

Pre-filing, individuals must complete credit counseling and post-filing, they must complete financial budgeting. These should have been implemented years before. They are designed to keep people aware of their spending and keep them on track.

There is also a change for chapter 13 filers. There is also a new income demand. All disposable income left after paying actual living expenses must now go into their repayment plan.

The IRS now determines the allowed actual living expenses, not the actual living expenses, if their income is higher than the median income in their state.

Each bankruptcy court houses a bankruptcy judge who is appointed to 14 years by the U.S. court of appeals. Though rare on occasion, regular district courts can hear and try bankruptcy cases on the courts discression.

Your first visit to court will most likely be brief. You will not be seeing a judge on your first visit, but instead a trustee of the court who will ask you questions regarding you financial status and history.

Questions will fall along the lines of where you live, what property you own, list of assets and liabilities and if you have any pending lawsuits against another person.

You will also be asked if you expect to inherit cash from a relative or other source. No creditors will be in attendance during your chapter 7 hearing and your lawyer will be with you the whole time.

For Chapter 13 hearings it will be the same basically. You will endure the same questioning in addition to questions regarding your repayment plans.

After sixty to ninety days you will be returning to court to finish the discharge order. It is very important though that you show up and are on time.

The court may see you in contempt and discharge your bankruptcy case unless your attorney successfully files a continuance. Then you will most likely have to pay your attorney an extra filing fee on top of everything else.

Bankruptcy is a difficult decision to make so it is best if there is another solution out there for you.

Begin by calling your creditors. Most are willing to work with you if you explain to them your situation. Tell them you are considering bankruptcy.

In many cases, creditors are willing to work out a different payment plan with you. Don’t hide from them either. Be straightforward and open about your financial situation.

Before filing bankruptcy, take a good long hard look at your finances. Get organized and begin writing out a budget. Start with your monthly income and deduct your monthly household expenses.

Understand how you are spending your money and seek out where you can make cutbacks. Perhaps buying groceries in bulk, or cutting back on phone services or cable services. Every little thing helps.

Next you will want to take a look at your credit cards. You may be able to take the balance from one with a higher interest to a lower interest one. Then get rid of those high interest credit cards all together.

Stay away from paying off credit cards with credit cards.  Other things you can try are refinancing a car loan or a mortgage. Or perhaps you have some family members or friends who are willing to pitch in to help pay off high rate debts and avoid bankruptcy.

But remember, this is a loan so when you are in a better situation, do make sure to pay back those who were kind enough to help you out.