Steps to Avoid Bankruptcy

October 09, 2019
Are you feeling so overwhelmed by debt that you think you have no choice but to file for bankruptcy?
Steps to Avoid Bankruptcy

The decision to declare bankruptcy is not one to be taken lightly. Not only is there often a stigma that comes along with it, but at the very minimum, it can have negative consequences on your credit score and your finances. For these reasons and more, you will probably want to do everything in your power to avoid having to take this drastic measure. 

Here are 5 things that can help you get a grip on your finances before it’s too late:

Establish a Budget

If you haven’t done so already, you need to establish a budget. This means you must figure out how much money you make, versus how much money you spend. And in this case, you also need to see how much you can realistically use towards debt repayment. 

Figure Out How Much You Owe

Sit down and make a list of how much you owe, and to whom. Once you’ve established what your debts are, you are ready for the next step, which is to contact your creditors. Tell them that you are having a hard time making ends meet and that you are trying to avoid bankruptcy. Explain that you would like to arrange to repay your debt and tell them how much you can realistically afford to repay. Then repeat this process with all your creditors.

Make Regular Payments

Pay the minimum amount required on your credit card or credit line. Although you’ll never get out of debt by paying the minimum amounts only, at least you’ll be making sure your credit score is not negatively affected despite your financial hardship. And if you realize you will be late making a payment, call your creditor and tell them when you think you will be able to send the money. Doing this usually prevents a negative credit report.

Eliminate All Unnecessary Spending

Keep your spending to a minimum. In other words, until you can say that you are no longer in the grip of debt, you need to buy only the things that are essential to living. What exactly these things are for you and your family is something that you will need to figure out for yourself.

Use Cash Only

In order to break free from debt, it may be wise to stop using credit cards altogether, at least temporarily. Why? Because credit cards encourage people to buy more than they can afford to, and unless what you buy is repaid the same month, then you are simply handing your precious money over to the credit card company. Can you really afford to give money away at this time?

Applying these few tips can undoubtedly help you work towards getting your financial situation under control. Of course, taking charge of one’s finances is rarely something that is easy to do. But the rewards are well worth the effort. Try it. You’ll see.