Oftentimes folks wait until they’ve spent every last penny they have before contacting a lawyer regarding bankruptcy. This seems like common sense: You go broke and then you go bankrupt. However, this is not how you should go about it. There’s a saying that goes, “Bankruptcy is not for people who are broke. Bankruptcy is a process that costs money and therefore you don’t want to wait until you are without funds”. Go figure!
So what is a person in financial trouble supposed to do exactly? This depends on your particular situation.

Situation 1: You still have some savings.
In this case the smart move is to take an honest look at your budget. Calculate the number of months you have left to burn through your cash while living and paying your ongoing bills and contact a bankruptcy lawyer a few months before the end of this period. If bankruptcy is recommended to you, the lawyer will be able to acquire his fee out of the funds you would have otherwise spent on bills and help you get a break from the ongoing need to pay debts. 11 Ways to Keep Money in Your Pocket in 2011 If the lawyer advises bankruptcy is not a good idea for you, then you can go about your regular business.

Situation 2: You have no savings, have significant debt, and now you lost your job that’s been keeping you afloat. Unless you can rebound and find another job quickly, you need to start thinking about obtaining a source of funds to start the bankruptcy process. One source of funds may be your tax return. Another source is to borrow the money from a family member or a really close friend. After the bankruptcy case is closed you are not legally bound to pay them back, but that does not mean you can’t pay them back if you choose.

Situation 3: Same as situation 2, however you don’t have a big tax return coming or you can’t ask any family members for the money to start the bankruptcy process.
All is not lost. You will have to stop paying your bills and start saving whatever you can for the bankruptcy. This can be done by taking a job or two at a much lower pay rate and save whatever you can for the bankruptcy. Some lawyers, like myself, recommend payment plans to help make this a bit easier, but you must finish the payment plan before your case can be filed. Why? This is true for all lawyers because continuing a payment plan after a Chapter 7 bankruptcy case is filed is illegal.

Conclusion: Do the smart thing and seek out a bankruptcy lawyer where you live to consult with before you run completely out of money. The attorney can give you free advice and help you decide if Chapter 7 or Chapter 13 bankruptcy is an option for you.