Bankruptcy is a form of legal protection that financially shields a debtor from actions by a creditor. Creditors may force bankruptcy on a debtor to prevent financial operation or debtors can opt to resolve their financial difficulty in this manner or. Bankruptcy prevents debtors from borrowing money for many years. During the time of bankruptcy courts generally monitor bankrupt’s income, thus restricting their standard of living. Bankruptcy offers some people a clean slate, but it is by no means an easy solution. Bankruptcy destroys people’s credit and may also force one to sell assets. So it will be better to avoid bankruptcy in order to preserve the credits. Below are some simple steps to avoid bankruptcy.
Selling Some of Your Assets
Whenever you notice that you can’t afford to make anymore payments, take actions immediately by selling whatever you can spare and use the money to pay off your debts. It will be too late if you wait until you’re behind on payments, you can sell your furniture, electronics, jewelry to pay off the debts. Many people can’t get past the inconvenience of living without their things, but you can adjust as its temporary. It will help you spare your credit and avoid bankruptcy.
Reduce Your Expenses
Total up all your expenses and divide those into necessities and non-necessities. Necessities are those items which you need to survive like groceries and housing. Non-necessities are nice things to have, but which you don’t need, like that designer sneakers or vending machine. Add up the minimum payments on your debts and the monthly cost for necessities. This is the minimum amount you need to pay in a month. You need to find a way to reduce your minimum debt payments or necessities if you don’t earn enough to cover them. Even little steps like switching from name brands to generics and cancelling cable can help.
Ask Creditors to Help You Avoid Bankruptcy
Let your creditors know you are having financial difficulty and want to avoid bankruptcy. Express your willingness to pay the debt to your creditors and ask if they can help ease the burden by decreasing your interest rate or lowering your monthly payment. Many credit card companies and banks have hardship programs intended for this type of situation. Make sure that your monthly payment and interest rate goes down before enter a hardship program else you could be stuck with an even higher minimum payment.
Get Help from Family and Friends
Normally, borrowing money from family and friends is a bad idea as it creates hardships and even ends relationships. Calculate the total money required to avoid bankruptcy and take a hard look at what you’re able to contribute. Ask your friends and family to help you make up the difference. But before you approach them make a plan of how you will repay them once your financial situation has turned around.
Getting rid of multiple small debts can be a challenge. By consolidating debt, you not only reduce the minimum payments and the total number of bills and you owe, but you also reduce the interest rate. This can reduce your debt faster.
Consider Debt Settlement
You may need to consider debt settlement If your debt vastly outweighs your income. A credit counsellor may be able to negotiate with your creditors to reduce the balance owed.