People declare themselves bankrupt when they are neck-deep in debt and have no recourse to repay it. While initially it seems like the best way out, filing for bankruptcy can seriously affect your credit ranking in days to come. It would help if you tried to avoid bankruptcy from the very onset, and today, we have shared some tips to do the same.
Calculate Your Total Debt
Knowing your current standing can be very helpful in preventing a financial crisis in the future. You can jot down all your dues in one place alongside details like total balance, minimum monthly payment and date, and interest rate. Seeing all your debt under one roof might seem overwhelming, but it can caution you of the trouble that lies ahead.
Create A Budget
If you think your finances are going haywire, creating a monthly budget is imperative. This can help you cut back on unnecessary things like dining out, heading to supermarkets, OTT subscriptions, etc. You can also consider selling your car (if you own multiple vehicles) and shifting to cheaper housing.
Look For Additional Sources Of Income
Your current income might only sometimes be adequate to meet your upcoming debts. An additional income can help you afford your minimum payments. You can look for part-time opportunities to blend in without disturbing your schedule. Often, workers enquire about overtime or extra shifts from their present employer. You can also try part-time gigs like babysitting, sitting, tutoring, and ride-hailing services in your free time. If you have things that you don’t need anymore, you can consider selling them off.
Try Out Strategies To Pay Off Debt
The snowball method is a known means of paying off debts, starting with small balances. It offers motivation as the number of outstanding creditors keeps decreasing with time. You can also try the avalanche method, beginning with the highest balance. The second technique is particularly beneficial if you want to reduce interest payments.
Try Debt Consolidation
Dealing with multiple debts can make the entire picture look scarier. In such a case, you can try a debt consolidation strategy that consolidates all your debts into one loan. This makes repayment cheaper and helps you manage the loan easily.
Opt For Credit Counseling
Before considering bankruptcy, schedule a meeting with a credit counselor. They can help you find a way out of the debt by reviewing your finances. A credit counselor will also share valuable insights on debt repayment and appropriate budgeting.
Seek The Services Of Debt Settlement Companies
These companies’ main aim is to negotiate with your creditors to lower your amount due, making it easier to pay off the loan.
Conclusion
Bankruptcy refers to the legal process of making a person debt-free and offering them a fresh start. However, filing for bankruptcy can impede your borrowing capability for the coming ten years. Nonetheless, you decide to proceed with filing for bankruptcy. In that case, you can seek help from a lawyer who is experienced in this subject and can advise you regarding whether you qualify for the same and the type of bankruptcy that matches your current situation.