Bankruptcy is not the only option if you’re swimming in debt. Avoiding personal bankruptcy could save you money and your credit rating. With the state of the current economy, more and more people are finding it difficult to meet their financial obligations. For a large percentage of these individuals, bankruptcy may seem like their only option. Fortunately, that is not always the case. Here are a few tips to avoid bankruptcy.
There are actually several ways to avoid bankruptcy. These methods should be put into practice at the first signs of difficulty. Once the situation snowballs and gets past a certain point, bankruptcy will be the only alternative. Don’t let that happen.
The first thing you should do is contact all of your creditors and explain the situation. Many will be willing to work with you, as this will ensure they will receive a more prompt payment. Typically, they would rather receive smaller payments over a longer period of time than larger payments sporadically.
While you’re talking with your creditors, many of them may be willing to lower your interest rate, as well, eliminate annual membership fees and reverse late fees. This will save you a great deal of money, in the long run. It will also shorten your repayment period dramatically.
It may be embarrassing but if some of your outstanding bills are medical or dental talk with your health professional. They may be willing to decrease the amount you owe. If they do so, get the reduced amount in writing for future reference.
Look at the credit accounts which are secured on an asset. You might be better off letting the asset be repossessed than continue making payments you can’t afford. Read your financing contract to make sure that if the asset is repossessed you won’t owe the difference between the value of the asset and the amount of the loan balance.
If your schedule allows, consider taking on a part-time job. The extra income can be used to pay down your debts, faster. You’ll be surprised at the amount of interest, which can be saved by making just a double payment. Triple payments, if possible, will save you even more. That’s because the minimum payment is primarily interest with little going toward paying down the balance owed, while a double payment means all of the second payment goes towards paying down debt not interest.
If you have several years on the job, ask your boss for a raise. Explain the situation, he or she may be receptive to increasing your salary. If that’s not possible perhaps you could work a few overtime hours and apply it toward debt repayment. You won’t know if you don’t ask.
Selling items that you no longer use or can live without can go a long way in helping you avoid bankruptcy. Do you really need two cars or an expensive stereo system? Every item that you can sell will bring you one step closer to paying off your debt. Don’t sell an item that is secured against the debt. For example you can’t sell your auto if you still owe money on it without paying off the lien.
Remember, the best way to avoid bankruptcy altogether is to try to live within your means. Don’t open multiple charge accounts or purchase luxury items that you don’t really need. There is nothing wrong with rewarding yourself, with a small gift, from time to time. Just don’t overdo it!
