5 Ways to Avoid Bankruptcy

When you find yourself overwhelmed by debt, it may seem like the only thing left to do is declare bankruptcy. However, it is important to understand that there are other alternatives available before filing Chapter 7 or Chapter 13 bankruptcy. These alternatives offer relief, as well as spare your credit. Here are five ways to avoid bankruptcy:

 

Selling some of your assets.

This alternative may seem like an obvious one, but let’s face it – it’s a really hard decision to sell that ol’ ‘68 Chevy Impala your grandfather handed down to you. In order to avoid debt and avoid that huge mark it leaves on your credit, it’s pivotal that you sell whatever you can and use that money to pay off your debts.

 

Spend less money.

Your main goal should be to save as much as you can each month to make a payment on your debt. In order to do this, you must cut back on your spending and make some serious sacrifices. There are several ways you can curb your spending. Here are some of the luxuries you can cut back on in order to save more money each month:

  • Movies

  • Unnecessary clothing

  • Expensive haircuts

  • Manicures/pedicures

  • Going out to eat

  • Cable

 

Negotiate with creditors.

It may be worth a call to your creditors to try to come up with a plan to avoid bankruptcy. Any monthly payment you can afford to make is better than no monthly payment to credit companies. You may be able to negotiate lower interest rates, changing the payment terms, r reduce fees. Note, however, that it is not guaranteed that your creditors will be willing to negotiate.

 

Seek consumer credit counseling.

If you aren’t able to negotiate with your credits, you may want to consider getting help from a professional. Go out and find yourself a good consumer credit counselor who has experience working with creditors to get your payment and interest rates reduced. A consumer credit counselor can also work with you and your creditors to come up with a debt management plan to repay your debts over the span of three to five years.

 

Be wary of debt consolidation loans.

A debt consolidation loan may seem like the perfect option when you have several debts to pay. It allows you to make one monthly payment to one loan and uses that money to pay off all the debts. Though it sounds nice, these loans come with a hefty interest rate and additional fees that just add on to your existing debt.



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