People in huge debt have a last resort to get their finances in order, and that’s by way of declaring bankruptcy. With the help of a reliable bankruptcy attorney, you can have whatever you owe nulled within 12 months. You’ll have the opportunity to start anew.
However, keep in mind that a bankruptcy declaration will make your financial records not very flattering. Your credit rating will bear the brunt of it for years. Your living situation can be negatively affected as well, with real estate properties and any other assets under your name at risk of being sequestered by your creditor.
With those things in mind, it’s in your best interest to avoid declaring bankruptcy. It should only be done if you have already exhausted all possible options at your disposal. Here are viable alternatives.
Reduce your spending
This is probably the most obvious approach. If you have debts to pay, prioritize their payment over other expenses you could do without. For example, if you go on quarterly vacations, you might want to skip those. Instead, funnel the funds directly to your creditors.
Coming up with a weekly budget is helpful too. That is so long as you stick to it. To do that, store your credit cards. Use cash or a debit card to pay for the stuff you need.
A lifestyle change is crucial here. If you drive by a Starbucks every morning for expensive coffee, you might want to forego those for the benefit of your financial future.
Increase your income
Reducing your spending, complemented with an increase in income, will allow you to slowly pay yourself out of debt. Get a second job, for instance. And if you still have spare time and energy, by all means, get a third job too.
You’ll be toiling for a few years, yes. But it’s a sacrifice you have to make if only to ensure that you do not compromise your financial future.
Do you have two big houses? Why not sell one of those? Better yet, sell the second one too and downgrade to a smaller house. You can use the money from the sales to pay your debts.
Downgrading to a smaller house would mean lesser expenditures as well. That’s another source of savings for you, which you can use to settle your account with creditors.
Let go of that boat you spent hundreds of thousands on. Sell your fancy car and drive a more practical and affordable one. Liquidate all assets you can do without. You’re better off living simply than living with the specter of bankruptcy hovering over you.
Talk with your creditor
Do not fear your creditors. Turn them into allies. Keep in mind that they will rather get money from you than wait for you to file for bankruptcy and risk not getting any money at all. Consult with your creditors and be transparent about your financial situation.
Ask for any leeway they could provide. Maybe they will be amenable to lowering your monthly payments. Your creditor might even go out of their way to offer you decreased interest rates so you’ll have a better chance at paying the principal amount you owe.
Crowdsource financial assistance
Pride is one of the seven deadly sins for a reason. It stops people from seeking help even when they are in dire need of it. Do not be proud. Learn humility. That’s most true if you are mired in debt.
Maybe you have rich parents. Ask them to bail you out. Promise to pay them what you can. If no one from your family is financially capable to assist you, reach out to friends. Tell them about your situation. Agree on loan and payment terms. Use the money you gather to pay yourself out of debt.
Your financial health should be of the utmost priority to you. Ideally, you do not allow yourself to be in a situation where your finances get too muddled that a bankruptcy declaration is in the offing. The most practical advice you’ll receive is to live within your means.
Apply for credits only when it’s essential. For example, if you are starting a business or there’s a medical emergency you need to spend for. Any other reasons outside those two are most likely negligible.
Remember that incurring debt not only affects your financial records. It will take its toll on your psychological and emotional health as well. Do not let yourself suffer from those eventualities by spending no more than what you earn.