The following is a guest post by Shaun Nichols of darngoodblogging.com.
In the recent era debt is a common issue. Most often due to reckless spending habits you may be entangled in the cycle of insurmountable debts. If you are overwhelmed with such debts, bankruptcy may seem to you as the last resort.
However bankruptcy filing hampers your credit score to a great extent. The negative markings stay on the report for nearly 10 years. It also spoils your chances of getting credits in the future. It is thus advisable that before deciding on bankruptcy, give it a second thought! If you can sort out the issue with other alternatives it will be a far better choice. If you are not sure about the alternatives, you can look for help from a bankruptcy attorney of your state to resolve such problems.
This article deals with a few smart ways which you can consider if you want to avoid bankruptcy filing.
- Analyze to find out if bankruptcy filing is really necessary: When you are unable to make the minimum monthly payments on your bills, facing creditor harassment every day, bankruptcy is not necessarily the only option. You need to know what your actual financial condition is. Is it worse or can it be brought under control? If the percentage of your debt is very small, bankruptcy filing is just not required. If other debt relief programs can resolve your problems then it will be better that you stay away from bankruptcy filing. If your debt amount goes beyond your control, only then you should think about bankruptcy filing.
- Plan a budget: Just when you figure out that you are facing financial troubles and your circumstances are moving out of hand, try to plan out a budget immediately. Limit your spending habits so you can restrict any more damage to your finances. Cut off on all the extra expenses that seems as a luxury. Make a monthly budget and try to stick to it. This will prevent deteriorating your situation further.
- Negotiate with your creditors to reduce debts: Contact your creditors and ask them to reduce your debts. Let them know your plans and intentions to get out of debts. If they agree on a negotiation plan then you can get the total debt reduced. If you are honest about your transactions with your creditors then there is possibility that your creditors will co-operate with you.
- Search for secondary sources of income: If your income is not sufficient to get the situation under control, look for other sources and ways to make money. Get some part time jobs or work from home that will add to your income. You can utilize this money to pay off some off your debts without disrupting your monthly budget. This will help you to get your debts under control.
- Make some changes in your lifestyle: If you want to resolve your financial issues faster it will be better if you make certain changes in your lifestyle. These can include buying things from dealer or co-operative store at a low price than buying them from a mall or shifting to a smaller flat from your luxurious accommodation. Avoid reckless purchases which can increase your debts.
- Consider selling away some of your assets: You can use some of your assets to pay off your debts. If you own a house, car or any item that will have a good resale value, consider selling it. The money you get from the sale can be used to pay off your debts. This will be better than filing bankruptcy as you can get control of your finances without hampering your credit report. Once your conditions improve and you pay off your debts you can buy these things again.
- Seek help from family and friends: If you cannot afford to make any repayments on your debt, you can look for financial help from any friend or family member. This will be a reasonable way to avoid bankruptcy filing as the money that you take will be interest free. As such there are less chances of incurring more debts. However you should make sure that you pay back your friend or relative as it can create ill feelings. Better still, before taking the money provide them with a repayment plan. This will increase your chances of getting the proposal accepted as they will be ensured that you are willing to repay.
- Seek professional help: If you want to avoid bankruptcy filing but are unaware of the other available options, then you can look for professional help. You can work with a consumer credit counselor who can help you to reduce your payment and interest rate. The counselor will advise you with the appropriate alternative for bankruptcy if your situation is not yet out of control.
This is a guest post by Shaun Nichols of darngoodblogging.com, which deals with various aspects of personal finance.
[Kevin: So, reader, have you ever been close to the brink? While part of personal finance is not getting close to bankruptcy in the first place, I find it empowering and helpful to know that one doesn't have to just give up. There are options, and turning the ship around is still possible.]