Debt is something that comes with lots of complications and negativity. Still, some people find debt as a way of living. Sometimes, debts can get so excessive that no matter how much you try, you just cannot pay them off, which leaves you with the only option of declaring bankruptcy.
Better financial management throughout your life can make you avoid living off debts. Even if you acquire debts for some important reasons, you need to ensure efficient debt management in order to prevent yourself from bankruptcy.
Bankruptcy can provide total financial relief in some cases, but mostly, bankruptcy can cause some other complications, such as very poor credit score, inability to file for mortgages soon after a bankruptcy discharge, and more. Therefore, you must look to avoid bankruptcy at all costs.
Here are 7 essential tips on avoiding bankruptcy.
1. Sell your assets
Selling your assets is the first thing you should be doing as soon as you see signs of you not being able to make regular debt payments. These assets can be anything – jewelry, furniture, other household items, etc. Sell them and use the money to pay off debts in order to avoid bankruptcy.
2. Pay off high-interest debts first
You need to be smart with your approach towards paying off your debts. Prioritize your debts with respect to the interest rate. Try paying off those debts first that have a higher interest rate, with the money you acquire by selling your assets or some other means. Your debt management knowledge will come into play here.
3. Cut down unnecessary expenses
Take a good look at your monthly household expenses. If you want to avoid bankruptcy, cut down any such expense that you can do without, such as cable TV. Once your financial crisis passes, you can always get back to your original lifestyle.
4. Ask creditors for help
Another thing that you must do in order to avoid bankruptcy is to talk to the creditors, especially credit card companies. Explain your situation to them and ask if they could reduce your monthly debt payments.
5. Look for credit counseling
You can avail of the services of a credit counselor if your efforts of talking to the creditors go in vain. The credit counselor you choose should be a bankruptcy expert and must help you avoid bankruptcy and perform effective debt management.
6. Seek help from family and friends
In times of such a crisis, you can look towards your friends and family for help, even though it is normally a bad idea. Ask them to lend you some money.
7. Try to settle with debt collectors and creditors
The truth is that the lenders will look to get something from you rather than nothing. Negotiate with them and ask to reduce the debt by 40 to 60 percent, which they would not be getting if you go bankrupt. This is an important step if you want to avoid bankruptcy.
The consequences of bankruptcy can be really harmful to your credit score and finances. Once you implement the above-mentioned tips, you should be able to avoid bankruptcy.