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Tips to Avoid Bankruptcy
Bankruptcy is not a process anyone wants to resort to. It can be seen as a way to get out from under a mountain of debt, but it also becomes a part of your credit report history. Put this option on the back burner and instead consider some options to avoid bankruptcy in the first place.
Create a budget. A budget is a tedious job, but it can save a lot of headache over debt later. Make a list of all the bills that are owed each month. Leave out incidentals like entertainment, eating out, and credit card payments. Subtract this amount from the monthly income. What is left is what will be used to pay credit card bills, put away in savings, and spend for leisure time activities.
Keep track of your bills for three or four months. This will give you an average amount for the bills that you can plug into your budget. If you can enroll in equal payment plans for utility bills, the payments will be the same every month. Creating a budget will help avoid debt, due to your discipline in following the guidelines that you have set. You can still enjoy a night out now and then as a reward for saving money.
Avoid using credit cards more than necessary. Credit cards carry high interest rates. We've all seen the commercials where things run smoother in the store when everyone pays with plastic. That may be, but using that plastic too much can leave you with a debt worthy of bankruptcy. Keep one credit card and get rid of the rest. Companies extend you credit with the hopes that you get overextended and then they can charge higher interest rates and all sorts of fees. Save yourself the headache and avoid using them.
When you get behind on a payment, call the credit card company. Everyone hits a road bump. A layoff or an illness can send things spiraling out of control with your finances. Let credit card companies know that you are in a bind at the moment. They may suggest ways to lower the payments or suspend them for a month or two until you are in better financial shape.
It takes several missed payments before a creditor reports the delinquent account to an outside agency. Instead of waiting for the hammer to fall, take the initiative to solve the problem before it gets worse. The company may suspend late fees and other charges when they become aware of your situation.
Go for debt consolidation advice. You hear a lot about debt consolidation. Agencies want your business. Check them out. These credit counselors are certified professionals that know the debt game and the creditors. For a small fee, they can negotiate with your creditors to find solutions to the financial problem. If you are considering bankruptcy, debt consolidation may work as an alternative.
Liquidate assets. You may have two cars, but can you make due with one for now? Selling property can free up the cash you need to pay off major debts. With a smaller debt, you may be able to talk to creditors and make payment arrangements. Move into a smaller house if the kids have moved out. Anything is a better alternative than bankruptcy.
Bankruptcy is not a process that people look forward to. Bankruptcy ruins your credit and may not entirely get you out from under. Learn to avoid this unfortunate choice before it's too late.
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