Practical Ways to Avoid Bankruptcy and Pay Your Debts
For many individuals without experience handling debt, the automatic solution is to file for bankruptcy. While filing for a bankruptcy may help you with some of your debts, you may find that in the end, you are worse off than you were. Therefore, before you file for a bankruptcy, you need to ask yourself if you can avoid it. Filing for bankruptcy should be a last resort. In this article, we tell you how to avoid bankruptcy.
1. Cut Spending
Start by figuring out how much you spend every month. The best way to do this is by having a budget. Next, control your spending. Immediately cut up credit cards and try to consolidate all your loans. Consider scaling down your lifestyle. This includes doing things like:
driving an older and less expensive
moving to a smaller house
selling your recreational vehicle
You even need to eliminate the small things like:
Buying expensive gadgets like cellular phones
Cutting down on your spending will free some cash which you can then use to service your debts.
2. Dispose some of your assets
If you have anything to sell, sell it and use the money to pay your debts. Waiting until you start lagging on your payments will make things worse.
Things you can sell include jewelry, electronics and old furniture. Craigslist, eBay and Kijiji could be very useful. Although this is a rather radical way of preventing bankruptcy, the good thing is that it will not only help you avoid bankruptcy but also spare your credit.
3. Talk with your creditors
Most creditors would rather have you pay something than nothing at all. Inform your creditors of any financial difficulties you are having and demonstrate your will to pay your debts. Ask them if they could ease the burden by reducing interest or lowering monthly payment or both. You may be surprised how credit companies and banks are willing to help.
4. Try bankruptcy alternatives
There are some alternatives to bankruptcy. Try to explore them first. As we said earlier, bankruptcy should be the last resort. They include the following:
• Debt consolidation loan. Combine all your debts into one loan. This works especially if you still have reasonable credit history. Consolidating your debts not only lowers your interest but also enables you to pay off your debts in a shorter period of time.
• Try credit counselling. Another alternative to bankruptcy is credit counselling or a DMP (debt management plan). Under a DMP, your credit counselor will work with you to have your multiple payments replaced with one monthly payment. As part of DMP interest costs are waived but note that you will still be required to honor your debts fully.
• Make a consumer proposal to your creditors. If you have large debts and you feel you cannot repay but you still don’t want to go the bankruptcy route, you may want to consider a Consumer Proposal. Through a bankruptcy trustee, you can make a proposal to your lenders to settle debts for smaller amount than you owe. This will involve you making single lower monthly payment to your trustee usually over a span of 3-5 years. This is a fantastic option if you have stable source of income.
Filing for a bankruptcy is a very serious decision. Therefore, before you make the decision, make sure you talk to a Licensed Insolvency Trustee to advise you on all the available alternatives. Like Todd Sheriff of Sheriff Sole & Madej Inc. say, filing for Bankruptcy is not the only solution. “There are many options out there. You just need to seek professional help. You may be surprised at how much help is out there,” he adds. Talk to a leading Licensed Bankruptcy Trustee in your area and get help today in eliminating your debt and avoiding bankruptcy.