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6 Tips on Avoiding Bankruptcy
Is it true that you can avoid bankruptcy? Well, it depends on your situation. If your debt is way, way too heavy that you cannot sleep soundly at night because your creditors and banks keep calling you, then maybe it's time to file for bankruptcy.
However, if you're just in the middle of it, maybe you have chances of avoiding bankruptcy.
Clearly, the best way to avoid bankruptcy is to actually be financially wise from the very beginning. Check your spending. Monitor your debts – and be sure to pay them in a timely manner. Save money. Keep some money for emergency purposes. Add sources of income streams whenever possible, and if you like – even if it simply meant taking a second job or taking a few freelance projects per month.
However, if you're starting to drown from your debts, it's time to do something before things get worse – that is, if it isn't worse yet. There are a few things you can do to prevent bankruptcy, and this article will just show you how.
Again, depending on your situation, you may or may not be able to avoid bankruptcy. But assuming the situation is bearable, here are 6 things you can do to avoid bankruptcy.
1. Plan your debt payment (and actually pay them!)
At this point, you should start being systematic with your budget. Your goal is to decrease those debts – until you ultimately eliminate them!
Now, your debts can be big and you seem that you cannot pay them. But don't be overwhelmed. That's why you'll plan first before you pay your debts.
When you plan, you get a bird's eye view of the situation. You get to see how much money you actually make and comparing them to how much debt you actually have. You might even be surprised that your current income level is enough to pay your debts off.
So, plan how you'll pay your debts – and actually pay them. Also, be sure to pay on time – late payments cost a lot!
This is on this stage where you may assess the need for bankruptcy. If your income level is so low compared to your debts, then maybe, considering bankruptcy is your best bet.
But then, we are talking about avoiding it, right? So maybe, we can do something else!
2. Cut as many expenses as possible
This is a simple way of saying – live to a bare minimum! I know you will miss your cable bill. On drastic occasions, it may even mean selling your car (and replace it with a new one) or rent on a cheaper apartment.
Now, you don't need to go to those levels right away. As always, it depends on your situation. But the key point here is to cut any unwanted and unnecessary expenses.
Perhaps, you can live without Netflix. You can live without your TV cable – just go to YouTube! Maybe you can limit the number of groceries you buy. Maybe you can opt for cheaper grocery brands.
Keep in mind that these are all temporary. Once you got out of your debt, you can go back to your normal lifestyle level.
And what to do with the money you saved? Use them to pay them off with your debts, of course!
3. Check out for any unwanted subscription
It's one thing to have unnecessary subscriptions or expenses – things that you don't need to live. However, it's very annoying if you forgot to cut a subscription that you don't use for a year.
If a subscription that you're not using anymore (and you probably have even forgotten already) is still taking out $10 a month off of you, then cut it out.
But I'm sure you'll cut them out anyways. So I say, check them out. Find them. Most likely, you've forgotten about them that's why you didn't cut them in the first place.
Check your credit card bill and see if there's anything you used to subscribe to that you don't use now.
Cutting these subscriptions and expenses may give a big relief on your finances!
4. Negotiate with your creditors
Did you know that Donald Trump kept negotiating with his creditors and banks during the time he's drowned in debts? And yes, he went bankrupt, too!
Now, you may be wondering, "How can I negotiate with my creditors? I don't have the negotiating skills and charisma of Donald Trump!" No, it has nothing to do with negotiating skills or charisma.
Negotiating with your creditors simply means you find a common ground where both of you will be comfortable. This could mean reduced interest rates, reduced amount of debts, reduced fees, longer time periods, etc.
Now, you may be wondering, but why would creditors want to negotiate with you? Simple. It's because it's better to receive some money than no money at all. Creditors – such as banks – understand that some debts simply won't come back. Although ideally, it's great when your loans are paid to you, in reality, this doesn't always happen – especially if you lend money to plenty of debtors.
So, to the mind of the creditor, having some money back is better than having no money back at all.
Also, some creditors may not want to negotiate, and that's fine. At least you tried. However, once you agreed with a negotiation, stick to it because your creditor will probably not negotiate again – he/she has given you a chance, after all, so respect the deal.
5. Find additional sources of income
Take a second job if possible. If this is time-consuming on your part, take freelance projects if you have the necessary skills. They won't pay you by the hour, so you have all the flexibility of working on the project.
Oftentimes, freelancing projects need talents in writing, digital design, voice acting, photography, coding, etc.
If you have a handy skill, sell it to your neighborhood. Do you know how to fix leaking pipes? Sell a plumbing service! Know how to work on cars? Offer to fix someone else's cars.
You can even go to simple tasks like mowing grasses and cleaning someone's window or house.
Of course, you don't need to go full-time on those – unless you decided to. At the very least, take additional sources of income while you're buried in debt.
Lastly, sell all the stuff you're not using – clothes, unused appliances, books, kid's toys, etc. They may or may not amount to much, but the money you'll get from them will surely matter!
6. Don't take debt consolidation loans right away!
A debt consolidation loan is a form of debt used to pay the old or existing debt. This may sound great – take a debt to pay off the other debts!
However, debt is a debt. It's what weighed you down in the first place! When you take a debt consolidation loans, you will only face another set of debt – plus new fees and interest rates. It may be costly in the long-run.
Also, if you used your home as collateral, you have just risk losing it.
So, what is the alternative to debt consolidation? Aside from bankruptcy (of course), your best bet is to increase your income in any way possible while reducing your expenses to as minimum as possible to give way for more money in paying your debts.
Remember, the underlying issue is not the debt itself. It's how you manage your money. Case in point: with a debt consolidation loan, yes, you wiped off your debts, but with what? With another debt.
It's all about being wise with money.
There are certain things you can do to avoid bankruptcy. However, if bankruptcy is inevitable, LG Law Firm has the best lawyers to help you with your bankruptcy case!
Also, for lawyers, it's best you get legal leads that is specifically for you.