Bankruptcy might give you some financial relief. However, it is not considered a favorable decision. If you are like many other Americans, there is a possibility that you are going through a financial crisis. You are here means you do not want to file bankruptcy. We understand your concerns. You cannot change your financial condition overnight. But yes, a few smart decisions can gradually improve your condition. You can avoid bankruptcy and get financial freedom with patience and careful planning. In this article, we are going to cover 10 ways to avoid bankruptcy.
1. LIMIT YOUR EXPENSES
You might have heard this many times before. However, you will have to follow it dedicatedly to avoid all the unnecessary expenses. As stated by a credit counselor, Elizabeth Bauer-Simmons, you will have to dedicate all the possible money to pay your debt. You can cut some expenses that include movies, unnecessary shopping, dining out, and many other things. You can also minimize your utility expenses. Live in a small house and use a cheaper vehicle to even improve the condition.
2. TALK TO YOUR CREDITORS
Have you ever tried to reach out to your creditors? If not yet, you can give it a try now. When you find it hard to make monthly payments, you should talk to your creditors to know about alternatives. Some creditors might not help you much. However, a few might consider your situation. They can help with lower interest rates and reduced fees. They can change your payment term as well. The credit card companies might offer help when they will realize that you have no money to make payments. Otherwise, they might lose the entire debt amount.
3. THINK OF A CONSUMER PROPOSAL
You can file a consumer proposal instead of a bankruptcy. The benefit of the consumer proposal is that they will not ask you to surrender all your assets. The consumer proposal will enable you to pay your debt with a repayment plan. The process will involve assessing your financial condition and set the repayment plan accordingly. You will have to electronically file your documents to get protection from creditors. If creditors accept your plan, you can repay your loan depending on the repayment plan. However, they will have the option to reject it.
4. PLAN YOUR DEBTS
Some of us do not plan our debts. We do not make time to plan the payment. You should not pay off debts randomly. You must develop a plan to pay your debts. You should know how to pay your debts in unfavorable financial conditions. Make a list of absolute necessities, and then your focus should be on the loans that come with high-interest rates. First, you will have to pay the highest interest rate debts, and then you can pay the debts with low interest. You will have to plan everything to avoid a financial crisis. Initially, you might not face a lot of difficulties. But once the situation will be out of control after a few months, you will not be able to manage it.
5. LIQUIDATE YOUR ASSETS
You can liquidate some of your assets to pay your loans. It will help you to avoid bankruptcy. You can sell your vehicles, jewelry, and some other things. Before making a decision, you will have to understand the impact. For example, if you have two cars, you can consider selling one. However, if you have one car, you might face difficulties. Weigh both the positives and negatives and then you can make a decision. Also, you must not use your retirement savings to pay loans. It might impact your future life.
6. AVOID BAD LOANS
You should not take bad loans. Bad loans mean you should not take a loan for luxury. You will have to avoid spending on buying new cars and vacations. You might qualify for such loans. However, it will worsen your financial condition since you are going to pay more in monthly payments.
7. SET A FINANCIAL GOAL
Some people will have a financial plan for the future. But most of us live in the present. If you do so, it is going to affect your future financial life. While taking any loan, you will have to understand your repayment ability. Are you able to make monthly payments? Calculate all your expenses, and then you can decide.
8. CONSIDER DEBT CONSOLIDATION
You can think of debt consolidation. If you choose this option, you will have to pay only one loan and one monthly payment. If you plan for a home equity loan, you might risk your home. Debt consolidation is a quick fix. However, you are going to pay more in the end. Many experts do not find debt consolidation a good choice since you will end up paying more in fees and interest rates. However, it is a better choice than bankruptcy.
9. DO NOT INVOLVE SETTLEMENT SERVICES
You should avoid debt settlement services. They will settle your debt for a fee. However, you will have to pay the fee upfront, and the amount might be around fifteen percent of your debt amount. If you believe in Consumer Reports, these services do not offer a suitable solution for your debt. They can even worsen your financial condition. Therefore, you should not use these services.
10. TAKE THE HELP OF DEBT MANAGEMENT SERVICES
If you want experts’ suggestions to get a suitable solution for your financial trouble, you can consider taking the help of debt management services. Some non-profit organizations can help you with a better solution. These services can help with all the possible options that include lower interest rates, negotiating with creditors, and reduced fees. If they succeed to negotiate with your creditors, you will have to pay the monthly amount to the management service. They will distribute it to your creditors. However, you will have to pay a minimal amount as a fee to debt management services.
You can avoid bankruptcy with some intelligent decisions. You might need to sacrifice your comfort and a few other things. However, these are not going to make much difference in the end. Your objective is to shape your present and save for the future. Slash all the unnecessary expenses to avoid bankruptcy or financial crisis.