Bankruptcy. It might as well be the ‘B Word.’ It’s a word whose very mention sends shivers down most people’s spines. Even just thinking about bankruptcy can be enough to make you tremble.
Its reputation isn’t a pretty one. In fact, bankruptcy is one of the most feared situations by people living in the United States. It’s considered by many to be among the top five life-altering events that a person can experience. It’s right up there with such negative events as divorce, disability, and the loss of a loved one. To most people, bankruptcy is bad stuff.
And, to make matters worse, it seems that bankruptcy is on the rise. Last year, over 1.5 million bankruptcies were filed. These included chapter 7, chapter 11, chapter 12, and chapter 13 bankruptcies and they affected both individuals and businesses.
Though the reasons behind individual bankruptcy filings are different on a person to person basis, there is certainly no denying that you’re in over your head when you are forced to do it. You have very little money, you can’t pay back your debts, and you have no other options.
While bankruptcy truly might be your only route of action, there are a few bases that you should cover before filing. When you’re in financial trouble, see if you can do these before taking more drastic measures.
The top two ways to avoid bankruptcy discussed below are a mixture of preventative measures and last-ditch moves. If you’re lucky, they might just help you avoid one of life’s worst events.
Avoid Bankruptcy by Taking Care of Your Debts
The best way to avoid bankruptcy is by taking care of your debts. Obviously, this is a lot harder to do than it sounds.
Taking care of your debts on your own might be hard but it can be done through debt settlement or debt consolidation, two forms of debt management we speak of often here on Project Debt Relief.
Normally, most bankruptcies, especially chapter 7, are liquidation bankruptcies. They wipe away all of your debt and erase it in your records. This is very troublesome to many people because it can also mean that you might have to give over your assets and property to help cover some of the losses.
Instead of settling for chapter 7, talk to your creditors (with the help of a debt settlement company) about debt settlement or debt consolidation. These two debt management methods can help you hold onto your money and your properties while also paying back your creditors.
In debt consolidation you make a deal with your creditors to repay your overwhelming debts without losing your assets. What happens is you consolidate – or combine – all of your debts into a single one. By doing this you only need to make one payment per month, sometimes a lower one, and you are generally stuck with lower interest rates.
Debt settlement works in much the same way but is slightly different. In it, you, or the settlement company you are working with, negotiate with your creditors for a reduced payment amount. Sometimes a lender will allow you to pay less back each month, or even overall, as long as you pay a little back. They basically want some of their money rather than none of it.
Check out our other top tips for getting out of debt as debt itself is the biggest reason for bankruptcy that there is.
Avoid Bankruptcy by Making Sacrifices
Whether or not you decide to settle or consolidate your debt, you should consider making sacrifices to avoid bankruptcy.
Taking a good look at your budget is an ideal starting point. You do have a budget plan already, don’t you? If not, look into setting one up. When you’re close to chapter 7 bankruptcy, cutting out any unnecessary expenses is essential.
Do you really need to eat out, go to the movies, have cable television, or buy new clothes? Would you rather do these things or avoid bankruptcy?
You should also consider your credit card use. Credit cards are one of the primary causes of debt in the United States and do nothing to reduce bankruptcy. Stop using your credit cards if you can and use cash for all of your purchases instead.
Though there are a lot of ways that you can avoid/prevent bankruptcy, the two discussed above are among the absolute best. Rearrange your priorities and talk to a debt settlement company/a financial advisor. You might just find that you can sort out your finance/debt/credit problems without resorting to the dreaded B Word.