Many people believe that filing for bankruptcy is a quick and easy way to clear all of their debt and give them a fresh start, but there are ways to avoid bankruptcy. This is simply not true. Filing for bankruptcy is not quick and it is not easy. Nor is all of the debt cleared as there are certain types you are responsible for whether you file for bankruptcy or not. Before making this hard decision, try to avoid bankruptcy with the following tips.
Do Not Wait
As soon as you realize you are having trouble making your payments each month, design a plan of action. Do not wait until you are behind with your payments or it may be too late to avoid bankruptcy proceedings.
Sell Your Assets
The option that is the easiest, and often the one most people avoid the longest, is to simply sell some of your property. Have a garage sale and clear your home of anything of value. You can list your items on the internet at various auction sites. Furniture, vehicles, jewelry and electronics are all good things to sell and make extra cash. Often, people do not want to face the inconvenience of not having their favorite toys available, but this situation is only temporary and once you have paid down your debt, you can replace your items.
Trim Your Budget
Are you paying for the most expensive cable television package or the cell phone plan with the most extras? By choosing less expensive packages for your extras, you will trim your budget and help avoid bankruptcy. Many people have both a landline phone and a cell phone. Choose one and cancel the other to save money. Consider cancelling your television package until you are caught up with your payments.
These tips are great, but many people are already living on a thin budget. If this is you, look for ways to increase your income. Ask for overtime or get a part time job. People with special talents or hobbies can make extra money by selling their products or skills. Advertise in local papers and tell your friends to spread the word about what you can offer.
Talk to your Creditors
This is perhaps the hardest thing for you to do to avoid bankruptcy. Picking up the phone and admitting to people you owe money to that you are having a hard time is hard on your pride, but it can also save you money each month and help you avoid bankruptcy. The reality is, your creditors want their money from you and if you file for bankruptcy, they may not get all of their money. Most creditors would rather work with you than lose your money.
Explain to your creditors that you are having a tough time right now, but that you are committed to avoiding bankruptcy and want to pay your debt. Ask if they can lower either your monthly payment or your interest rate to help you make your payments easier each month. If you simply cannot make these calls, or your creditors are turning you down, call a credit counseling agency.
Borrow Money from Family or Friends
Again, this is a hard decision to make but avoiding bankruptcy is more important than your pride. Before you ask for help, have a plan written down so you can show exactly how you intend to repay their loan and when they can expect their first payment.
Settle any Debt that has been Sent to Collection Agencies
Usually, debt settlements are a bad idea because of the damage they can do to your credit score. However, if you are trying to avoid bankruptcy, you may need to do this. Only choose debt that has been sent to a collection agency. Call your creditor and ask about a debt settlement amount for that account and be ready to pay their lump sum requirement.
If you decide to settle your debts, do not use a debt settlement agency. You will be paying them for doing something you can do yourself and save time and money in the process. Pick up the phone and make the calls yourself.
Avoiding bankruptcy is not easy, but you can do it. As soon as you feel yourself struggling to make ends meet every month, use some of our tips to help yourself before the hole becomes too deep. It is hard to make these choices, but it will be even harder on you to file for bankruptcy.