To most of us, debt is a way of life. However, settling a debt can become challenging at times, to the point where most people opt to file Chapter 7 or Chapter 13 bankruptcy. While filing for bankruptcy seems like a fast and easy way to get out of debt, there are tips to prevent bankruptcy so that you can benefit from a loan to finance major projects in the future. Let’s have a look at some of these tips.
1. Seek creditors’ and family help
One of the best ways to avoid bankruptcy lies in seeking help from creditors. After all, credit firms prefer to get some cash than nothing at all, since that is the way they make their earnings. In this regard, call a lending firm and let them know that you are in a bad financial situation.
Also, express the willingness to pay, and request them to ease your burden by lowering the interest rate or the monthly payment. You might be lucky enough to benefit from the hardship program so that you can manage to plan your expenses in a better way.
Also, do not shy off from talking to friends and relatives. While borrowing money from them might seem like a bad idea, these might end up to be the best people to provide financial support. Therefore, compute the amount of cash you want to borrow from them and consider the approach to use so that you can pay them back.
2. Sell some assets
There are lots of online sites where you can sell whatever that you do not need. So, sell whatever you do not need so that you can pay off your debts. The reason is that you do not want to wait until it’s too late and lose your property to the creditors or end up paying a high amount of interest. So, take action when you notice that you are headed to bankruptcy and spare your credit.
3. Settle your debts
Prioritizing your debt repayments and paying them off is another tip to preventing bankruptcy. Begin with paying off your secured creditors or those with the highest interest rates. After that, you can pay the unsecured creditors, where you can pay all of them some amount to ensure that your payments are current.
4. Live within your means
While you might have heard about this many times but allowed the temptation of living beyond your means take over, note that living within your means is one of the easiest ways to handle your spending habits. In this regard, figure out the amount of money you are supposed to spend in a month.
When doing this, do not forget that you shouldn’t spend more than you earn. So, avoid a luxurious living style by skipping vacations if you can’t afford, moving to a smaller and affordable house, driving a less-expensive car, and selling your recreational vehicle. That way, you can channel such cash to basics such as food, housing, clothing, water, among others.
5. Get an alternative income source
Although minimizing your spending is a great way to prevent bankruptcy, I recommend maximizing your income as a great addition to this step. In this case, get a second job if you already have one. You shouldn’t fail to get a third job if you have a second one. After all, your mission should be to maximize the amount of cash on your end so that you can clear your debts and manage to pay your bills – read article on how to manage money better.
Bankruptcy is usually the last resort of those in financial difficulty. However, I believe that you will agree with me that this is not the best place to be. That said, I recommend that you apply the above tips so that you can reduce the chances of going bankrupt.