Tips to Avoid Bankruptcy

April 7, 2010

Bankruptcy is an extreme move to take after you’ve exhausted all other options. It is never a quick fix or a simple solution to get out of debt. After you file for bankruptcy, it will be incredibly difficult or near impossible to get any sort of financing or credit for a long time. Here is some advice about how to avoid bankruptcy.

Filing for bankruptcy means you start over with a clean slate and must build your credit back up again. In the financial world, no credit equals bad credit. You have to start from scratch so that you can build up a decent credit score. Before you decide to file for bankruptcy, it is advisable to explore all of the other alternatives.

Here is some advice to consider:

  • Try selling your assets. When you declare bankruptcy you will lose almost everything you own that is of value. Rather than losing everything in this way and having nothing to show for it, try selling your assets or downgrading. Consider moving to a smaller house, trade in your car for a cheaper one, and go through your things to find what someone would like to buy. You probably have all kinds of things you don’t even need that could be worth something.
  • Take on more hours at work. More work means more money. Of course it’s important not to work yourself to death, but taking on more work could prove to be more helpful than harmful.
  • Find ways to organize your debt. Take advantage of debt consolidation services or debt negotiation. You can’t resolve your debt without paying it off, but you can make it easier to pay.
  • Let the people you owe money to know what your financial status is. If necessary, threaten nicely. If they understand the situation you are in, they may be a little more lenient or patient with you. It’s certainly better than filing for bankruptcy. Believe it or not, your creditors don’t want you to go bankrupt. If you file for bankruptcy, they won’t get any money from you. It’s better for them if you’re able to pay a portion of what you owe.
  • Talk to a professional. There are financial counseling services you may take advantage of to help you organize and pay off your debt. Talking to a counselor will educate you better on your options and make certain resources available to you that you may not even know existed.
  • Start planning your spending. It’s beneficial to look at life as a series of goals and plans. Make getting out of debt your main goal and stick with it. Cut down every expense you can afford to and keep your goal in mind at all times.
  • No matter what, avoid taking on more debt at all costs. There’s no such thing as borrowing your way out of debt.
  • Make sure you are adequately protected. If you get help or are going to get help with your debt, make sure it’s in writing. This protects you legally in case the person helping you wants to screw you over. Also consult a financial or legal expert if you are unclear about something.

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