Everyone hopes they will never have to face the problem of filing for bankruptcy. It is a big decision and can actually hurt someone financially for a very long time. If you are in a situation and considering bankruptcy, you should know that there are a lot of other options to try before taking the final plunge. If you are afraid that you might be headed in that direction, there are quite a few things you can do to change your situation.
In a situation when you are considering bankruptcy, you might want to take a look at your expenditures. Marking differences between needs and luxuries will help a lot in understanding how much you can cut down on your spending. In today’s world where purchases through credit cards are rampant and other loans such as mortgages, rents and large purchases are common, one can easily end up spending way more than they are earning. You may also be paying a lot of discretionary expenses,= such as having a premium service for something you can get for less or even free.
Establishing a proper budget and bookkeeping to calculate your income to expense ratio will allow you to see the things you can exclude from your expenses. One of the primary things you should look at is subscription or membership services that you don’t use very often. For example, gym/pool memberships. If matters are critical, consider canceling the services that you identify as luxury. You’d be surprised by how much you can save with just a few changes. Better yet, they might be able to help you delay your decision in filing for bankruptcy.
Do Not Accumulate More Debt
This is crucial in avoiding bankruptcy. It is critical for you to stop spending beyond your means. It is highly recommended to stop the use of credit cards as doing so will help a lot in getting back on track financially. Your main focus should be on paying off your credit card bills as soon as possible in order to avoid building up interest.
Avoid applying for any loans such as a home equity or car loan as this may cause your credit score to drop which can worsen your financial situation. If it is absolutely necessary for you to take out a loan, consider checking your credit score before making the decision. Prioritizing the repayment of loans and debt in your budget is key. Make a plan that will help you repay your loans quickly so that you don’t get burdened by higher interest fees.
Increase your Income
This might not be favorable (or even possible) for a lot of people, but squeezing in a weekend or part-time side job can help a lot in streamlining cash flow. The extra cash can be entirely utilized in your repayment of debt. Freelancing is pretty trendy these days and, if you have the skills, you can make money to put towards solving your financial issues. Other side jobs, such as waiting tables or driving your car with Uber, can also help you out.
Try Negotiating with your Creditors
Reach a compromise with your creditors on the repayment plan for your debt. Extending the date of maturity or restructuring the entire payment plan altogether can actually be really helpful in getting out of the financial crisis that you are facing. Try reaching an agreement before consulting a bankruptcy lawyer. Once you do reach an agreement, however, get it in writing to be on the safe side if the creditor acquiesces.
Get Professional Help
Consult multiple legal and financial professionals before filing for bankruptcy. At a bare minimum, consult a debt relief attorney alongside a bankruptcy attorney in order to get the entire picture. Speak to your accountant or bookkeeper to get an even clearer idea. These professionals might also help you to find other ways to get out of debt and will weigh the advantages and disadvantages of each decision for you.
Create an Emergency Fund
If you have solved your bankruptcy dilemma, this is the best time to invest in a savings account or emergency fund. Both of these will be able to help you in case you run into any sort of financial issue in the future.
Keep the repayment of loans prioritized until you have completely gotten rid of them and try not to get new loans that can hurt your credit rating or financial situation. Continue saving up for times when you might be very much in need of money.
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