Considering Chapter 7 bankruptcy and whether to file is never easy. Facing unpaid bills and debt collector calls? Don’t stick your head in the sand!

The first thing to do is get organized.

  1. Start putting all your bills and letters in an envelope or box. Yes, open them first to be sure of what they are, but make it easy to keep them together.
  2. Make a budget, and make the budget realistic. Don’t try to “make it work.” Start with what you really need to be spending on the basics.
  3. Consider using software, such as or to track your expenses for 30-60 days to see where your money is going. People often underestimate critical expenses such as medical. Software can automatically download your bank account transactions and categorize them. This will help you see a clearer picture of what you need to live.
  4. Make an appointment to talk with a bankruptcy attorney. This doesn’t mean you have to file bankruptcy — it means you are going to learn about your options. Most consumer bankruptcy attorneys offer a free initial consult and you will learn a lot.
  5. Be mindful that timing is important. If you are unable to pay your debt, creditors are required to “charge off” the debt on their books. This doesn’t mean the creditor can’t continue to try to collect on the debt. It does mean that the creditor may send you a 1099 at the end of the year. This could cause you to have to pay taxes on the “charged off” debt. Debt discharged in bankruptcy can be exempted from Cancellation of Debt income tax. If you believe you may have to file bankruptcy, see a bankruptcy attorney in time to file before the end of the year.
  6. If your current income is not enough to pay your essentials and service your debt, before you liquidate an asset or borrow money to pay off debt, talk with an experienced bankruptcy attorney to learn all of your options.

Considering Chapter 7 bankruptcy is easier when you’re able to get organized. Don’t be afraid to face where you are and don’t think you are a failure if you file bankruptcy. As Winston Churchill said: “Success is not final, failure is not fatal: it is the courage to continue that counts.”