Bankruptcy is a term that scares everyone dealing with their finances. It is no secret that most adults tend to end up in debt. If this debt is not paid off in time, you might end up having to file bankruptcy considering how the vast majority of bankruptcies are filed by consumers and not by businesses (In the US). Bouncing back after that will be very difficult.
You must do your best to avoid having to file for bankruptcy. There are many steps you can take in order to manage your debts in a proper way. Here are some tips that can help you:
Know Your Expenses
Being aware of every single expenditure is a crucial part of managing your finances. Analyzing your past expenses can also help you in avoiding bankruptcy as you will be able to get a clear picture of how much of your income you save and what part of it is spent on different necessities.
It will help you make a proper budget plan as you would easily figure out which expenses you can cut down or avoid. Keeping proper track of your monthly expenditure will come in handy for paying off all your debts in time and not going bankrupt.
Sell Unnecessary Assets
This measure can be taken if you cut down on extra expenses but are still unable to pay off your debts properly. If you look around your house, you will notice that there are dozens of items that have rendered useless but you have still kept them. Identify these things and set them aside to sell them.
Some of the assets won’t bring you a lot of money but every single penny counts in avoiding bankruptcy. If you can’t bring yourself to sell any of your assets, you must remember the fact that if you reach a situation where you have to file for bankruptcy, all of your assets will have to be sold off. So, it’s better to sell the ones you have no need for and save the ones which are precious.
Get a Consolidation Loan
A consolidation loan is an unsecured loan that will help you pay your debts in time and avoid bankruptcy. The amount you receive won’t be enough to pay off all your debts but you’ll at least be able to pay off those with a higher interest rate and get yourself some respite.
In the long run, this loan will be very useful in avoiding bankruptcy, just make sure that the amount you receive is used to pay off your debts and not for other expenses. Most lenders will take your credit score into account when giving this loan but there are a good number of those who don’t need a high credit score.
Consider Debt Settlement
If you are unable to pay off your debt even after trying to cut down your expenses and get a loan, you should think about debt settlement. Contact a debt collection agency to help you out. Make sure that you choose the agency carefully because not doing so can get you into more trouble.
Your debt settlement will basically include withholding all payments to your credit for a while and then starting to negotiate. It will help you settle for an amount that is lesser than what you’d otherwise owe after a couple of years. You should keep in mind that your credit score will take a massive hit if you go for this option. However, it would be impacted worse if you file for bankruptcy.
Ask Your Personal Contacts for a Loan
If after trying out all options, you still see yourself going bankrupt in the near future, and you don’t want to engage with a debt settlement agency, this is your last resort. It’s not the best option as it might put a strain on your personal relationship but you have to try if you want to avoid going bankrupt.
When you ask your friends and family for money to pay off your debts, make sure that everyone involved is clear if the money is a loan or if you don’t have to repay it. In case it’s a loan, pay it back as soon as you can to avoid damaging your relationship. Unlike debt settlement, this option won’t damage your credit score but if you don’t tread carefully, it might destroy your relations.
Try to do all of these things to the best of your abilities otherwise, you may have to fill up that dreaded bankruptcy form.