Why You Should Avoid Bankruptcy at all Costs
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Credit cards, student loans, personal loans, car payments, home mortgage, medical bills and countless other debts are continually accumulating. Then you add interest and late fees and it becomes overwhelming. Bills are piling up on your kitchen table. The creditors are constantly calling. You are barely making ends meat and you don’t know how you are going to pay off all your debts and recover your credit. You feel like it is hopeless and your only option is bankruptcy.
Before you throw away everything you have worked for and damaged your credit for years to come, consider other possible options available to you.
Bankruptcy is often declared when a consumer is unable, for one reason or another, to pay his debts. Typically, in consumer bankruptcy, the consumer’s debts are completely forgiven. In return, the consumer agrees to relinquish any assets he may have to cover the debts.
Another negative aspect of declaring bankruptcy is that it appears on your credit report and remains there for several years. Anyone that looks at your credit report will see this huge blemish. It may affect your ability to receive a loan or credit card in the future.
It may seem hopeless to you now, but there are other options to becoming debt free and avoiding bankruptcy.
Stop using your credit cards. People tend to spend more money when they use a credit card then when they pay with cash. One reason is it doesn’t seem like real money. They use their card freely without thinking about the bill. They are also hit with high interest rates, making the items they purchased more expensive than they actually were. If you can’t pay cash for it, you don’t need it.
Throw away those credit card offers. You didn’t get those offers because of your great standing with your creditors. The credit card companies want your money and they don’t care who you are. Anyone can receive a credit card, including children, deceased people and even dogs. Yes, each of those scenarios has occurred. You don’t want to depend on a credit card to get you by your immediate expenses when you will actually pay much more when the bill arrives.
Stick to a budget. Know exactly where every dollar is being spent each month. Create a budget on paper and don’t leave anything out. Then stick exactly to your budget. If you have spent all your eating out money, for example, and the month is only half over, eat at home the rest of the month.
Keep your bills current. Pay all your bills on time and if possible pay more than the monthly minimum. The best way to do this is what Dave Ramsey; a well known financial counselor calls the “debt snowball”. Pay the minimum on all but your smallest debt and put every dollar you can spare into that debt. When your smallest debt is paid off, take the amount you had been pay on that debt and put it towards your next smallest debt. Repeat this until your debts are eliminated. After you pay off the first debt you will be encouraged to keep it up.
Find your “hidden money”. “Hidden money” is expenses that you can reduce, such as changing phone carriers, reducing your cable services to basic cable, or reducing your electric bills by changing the settings on your thermostat. If you look around your home, you will likely find many sources of “hidden money”.
Negotiate with your creditors. Creditors want your money. If they know you can’t pay, they also know it means they will not receive your money. If you contact them as soon as you know you will be unable to pay on time, let your creditors know. It they know that you are sincere in your desire to pay your debt, they are likely to work out a payment plan or even reduce your debt because they would rather receive some money than no money. It is best if you contact them as early as possible. If you know before the payment is due that you will not be able to pay on time, contact them immediately.
Debt can be a very debilitating and embarrassing situation. If you find yourself in debt try these options to become debt free. Do everything you can to avoid bankruptcy. It won’t be easy, but it will be worth it.
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Why You Should Avoid Bankruptcy at all Costs
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