Bankruptcy can give a lot of people a fresh start without any prejudice, but it’s not going to be an easy highway. It can possibly affect your credit; force you to sell all what you got and may create a bad impact in your future employment. With this, you may need to take positive measures to avoid that financial situation. And here are the ways to how prevent it from happening.
Adding up all your debts
You need to have clear and bigger picture about your debts. This can be done by gathering all things that can possibly affect your financial situation, such as your bills, all statement of accounts, mortgage, home value and every financial document. These things are your debts or assets, which you may need to review and compute. Break these debts into two types: the good debts (home loans and student loans) and bad debts (credit debts, personal loans, car loans and medical bills). In this manner, you can assess your situation if it has gone worse or if you are still capable of paying the debts. Nothing is better than being sure about your own situation.
Minimize your expenses
Reviewing all the things that you’ve been spending can make a difference on your finances. You should put more investment on the things you need and avoid spending on those things you don’t really need. Important necessities like food, housing, clothing, and groceries should be your priority. If you can pay for your monthly bills but incapable of paying your other debts, you may need to avoid buying unnecessary things that you don’t really need.
Merge your debts
When you have lots of multiple debts piling up, getting rid to any of them is not an easy task. You can reduce your debts merging them all. It will help reduce the number of bills and it can also reduce the interest rate. Aside from that, it’s also necessary to pay your debts more than your minimum payment every month. Paying your debts this way will eliminate them one by one making you far away from the possibility of bankruptcy.
Use the advice of a Credit Counselor
A credit counselor serves as your back up in driving you away to bankruptcy if you can’t do it with yourself effectively. With the help of a credit counselor they can teach you money management by totaling all your debts, advise you ways how to reduce your expenses, and consolidating your debt. Not only that, they can assist you in getting a consolidation loan by meeting the requirements. These reputable credit counselors can also help get you involved in a debt management program which can be very beneficial to your part in getting rid of negative attitudes in paying debts
If your total debt is bigger than your own income, then it’s better to consider the idea of debt settlement. A credit counselor can still play a part in this situation where they can discuss and negotiate with your creditors which sometimes results to the reduction of your balances. Although, this method can affect your credit but it’s more worth it than getting a bankruptcy. Debt settlement is not that easy but it’s a way to prevent bankruptcy from occurring especially that it’s your only last resort when you’re tired of other options. Debts can still be settled without you going on bankruptcy. It’s one of the best reasonable options to consider since bankruptcy will really have a bad effect on your future finances.