Can Bankruptcy be Prevented? Here are some tips on how you can avoid filing for bankruptcy.
Medical bills are the main reason that people end up filing for bankruptcy. However, a lack of saving and poor spending habits is why people end up filing for bankruptcy. It is common for people today to live above their means. That is why, in many cases, you can avoid bankruptcy.
If you want to know how to avoid bankruptcy, then you can take the following steps.
Create a budget
Increase your income
Consolidate or settle your debt
Sell your assets
Get help from a credit counselor
Ask creditors to help you
Change your habits
Step 1: Create a Budget
The first step in getting your money in order is to figure out how much you are spending each month. You will then need to find ways to trim your spending. It is best to pay in cash whenever possible. Studies have shown that people spend less money when they use cash.
If you have credit cards, then you should hide them in your drawers. You may also want to downsize your lifestyle. For example, you can trade your vehicle in for something less expensive. You can also move into a smaller home. Additionally, if you have a recreational vehicle, boat, or motorcycle that you are not using, you can sell it.
Step 2: Increase Your Income
You can avoid filing for bankruptcy by increasing your income. There are several ways that you can increase the amount of money that you bring in each month. For example, if your current job is not paying you enough, you may want to get a second one. If you have a spouse, you may also want to encourage them to get a second job.
You can also generate extra income by selling some of the stuff that you have. Additionally, if you have extra space in your home, you can generate more income by renting it.
Step 3: Consolidate or Settle Your Debt
Consolidating debt is less damaging to credit, and it makes it easier to pay multiple creditors each month; however, this may only work if you can make payments. Debt settlement is when you negotiate with the creditors to reduce the amount of debt you have. You will pay a portion of your debt, and they will forgive the rest of it.
Step #4: Sell Some of Your Assets
Selling high-value assets can be a quick way to pay off your debts, albeit a temporary way. Consider home products like furniture, jewelry, electronics, or other home products. These days, you can sell products on Facebook marketplace, Craigslist, eBay, and many other platforms. Selling assets can help you meet your immediate payments, avoid bankruptcy and save your credit.
Step #5: Get Professional Help for a Credit Counselor
If you are still struggling and want to know how to avoid bankruptcy, it is time to seek professional help. Credit counseling can help you get your finances under control. However, you have to be wary of people who will offer you a quick fix.
Step #6: Ask Creditors to Help You
Working with creditors can help when you’re dealing with financial hardships. From the creditor’s perspective, they would rather you pay some money than no money at all. It’s worth asking to ease your debt burden by lowering monthly payments or decreasing the interest rate. It’s important to note that many banks and lenders have hardship programs to help with financial hardship.
Step #7: Change Your Habits
It is best to make necessary changes to get your finances to avoid bankruptcy altogether. You will need to build an emergency fund. An emergency fund will provide you with an extra cushion if something goes wrong. Be aware of your spending habits and try to stay out of debt.
When it Makes Sense to File for Bankruptcy
Bankruptcy may be an option if you cannot repay debts while covering for retirement, food, and shelter. As a rule of thumb, if your consumer debt equals more than half your income, bankruptcy may be the best course of action.
There are many benefits that bankruptcy can bring. It stops collection calls, lawsuits, and wage garnishments, erases debt, and can even help your credit score.
If you need help navigating the bankruptcy process, our law firm can help. Contact the Michigan bankruptcy attorneys at Moran Law by calling 866-820-5495. We provide both chapter 7 and chapter 13 bankruptcy.
