If you’re feeling swamped by debt and money problems, you might consider bankruptcy as a solution. After all, a Chapter 7 bankruptcy can get your debts discharged in 90 days. This is a very tempting solution that works for some people. However, it has major consequences, so you’ll want to avoid bankruptcy if at all possible. Here are some tips to help you avoid bankruptcy.
1. Keep Track of Your Spending
You need to have a budget. If you have an incomplete budget now, it is time to tighten it up and make sure it includes everything you’re buying. If you don’t keep track of your spending, you’ll end up spending a lot more money than you anticipated without realizing it. This might lead to you taking on debt in order to cover the remaining bills. Chapter 7 bankruptcy can discharge debt like credit cards, medical bills, personal loans, and overpayment. But it comes at the cost of your credit and has a lot of consequences. If you track your spending carefully, you’ll be able to tell where all of your money is going. It will also let you find the holes and plug them up, preventing you from wasting money.
2. Don’t Overspend
Even if you know where your money is going, spending too much of it will still put you at risk of bankruptcy. Don’t overspend on purchases, both large and small. Instead, learn how to research prices and find different savings opportunities. You might be able to find a cheaper alternative to the item you’re looking at. Or you can get it on sale during certain times of the year. When you avoid overspending, you can also avoid taking on debt since you’ll be working within your income. So be conscious of prices when you’re buying and look for ways to bring those prices down.
3. Work With Your Creditors
If you’re overwhelmed by your debt, there may be ways to make it easier without bankruptcy. Lenders are often willing to work with you if you explain what is going on. Call your credit card company and tell them if you’re struggling to make your payments. While they won’t cancel the balance, you might be able to get a lower interest rate or avoid a penalty for late payment. These companies don’t want you to get in trouble with your debt. They’d rather work with you to find a way in which you can still pay them and avoid bankruptcy. In 2016, there was an increase from 24,797 companies in bankruptcy in the first quarter of the year to 25,227 in the second quarter. If you work with your creditors, you may be able to avoid being part of this.
4. Consolidate Your Debt
Often, you have debt coming from all different sources. You may have credit cards, auto loans, medical bills, or other loans you’ve taken out and can no longer pay. One way to make these manageable is by consolidating your loans. In this case, you’ll take out another loan and use it to pay off all of your debts. Then you’ll only have one bill to pay, with only one interest rate. This can make your payments much smaller each month, giving you a chance to get back on your feet.
While bankruptcy is a solution to financial troubles, it can be a difficult one. You want to find ways to avoid it if at all possible. If you’re struggling with debt, consider applying these solutions to your problems first. By figuring out your financial situation and looking for assistance, you will have a better chance of getting back on your feet without filing for bankruptcy.