Let’s talk about how to avoid bankruptcy and what you can expect to happen in each situation. Some options are more favorable than others, and once you’ve explored all of your options for getting out of debt, you may find that bankruptcy is the best option after all.
1. make more money
Actually, this is a no-brainer. When you’re looking to get out of debt and avoid bankruptcy, the best thing you can do is make more money. I know, it’s easier said than done, but have you really explored creative and innovative ways to increase your monthly income? Here are some of my suggestions that have helped previous clients:
-
Rent a room to generate rental income;
-
Get a second job;
-
Ask for a raise at your current job;
-
Put the children to work and if they are working, STOP PAYING THEIR EXPENSES;
-
Have a garage sale or sell unwanted items on Craigslist;
-
Start a side business repairing or reusing items for resale.
2. Cut expenses
The budget ledger only has two sides; income and expenses. Another best strategy is to not only increase your income but also reduce expenses. The leftover money can be used to pay debts and avoid bankruptcy. Below are some ways to reduce expenses that are often overlooked:
-
Transportation: Reduce transportation costs by taking public transportation to work. You would be surprised to know that your stress will decrease with public transportation. If you plan to drive, make sure your car is in good condition and paid for. You may need to downsize and get a cheaper car that is paid off to reduce your car payments.
-
Insurance: Home and auto insurance costs can be reduced by examining the number and type of insurance policies you have. If your car is older, consider removing any physical damage coverage (comprehensive/collision) and keep liability only. The liability limits of insurance policies should only be sufficient to protect your assets. So if your car and home have no equity, then you don’t need a high limit insurance policy. Also, look for insurance.
-
Utilities: Turn off the lights and air conditioning. Reduce your cell phone bill or cut your landline. Call each company to reduce services that will reduce your bills or cut them completely.
-
Groceries: Take advantage of coupons only when it makes sense: Buy shampoo, soap, toothpaste, dishes, and laundry supplies with coupons. Paper products are another great household item that can be purchased with coupons. Reduce your grocery bill by planning your weekly meals before shopping and consider other meals where you can use similar ingredients. Cooking at home can not only save money because it’s cheaper than dining out, but it can also help you live healthier.
The consequences of adjusting the budget by increasing income and reducing expenses are that it is a long-term lifestyle commitment that could take more than five (5) years to pay off all your debts. Even after maximizing this strategy and applying all your disposable income to the debt, it may not be enough and you could still face bankruptcy. However, I still believe that knowing the numbers is an important step in financial transformation and eliminating debt, no matter what direction it takes.
3. Debt payment
If you are behind on credit card payments, they can be negotiated; sometimes for a few cents on the dollar. This may seem like a money-saving strategy, but it can leave your credit score in ruins. First, you’ll need a sizable savings account so that when you settle, you can pay a lump sum to pay off the debt. Be sure to get any agreement in writing and ask them to remove the trade line from your credit report. You may not get a credit cleanup, but it doesn’t hurt to ask either. This can be an effective debt elimination method if you only have one or two debts to work with. Something more than that and a bankruptcy case It would be a cheaper, better and faster way to get out of multiple debts at once.
The consequences of debt settlement are that not only will you pay off the debt, but your credit may be negatively affected as a result.
Comment here