Most people file for bankruptcy to get out of debt, but it has serious consequences that may affect you for a long time. You may face various lawsuits, get your driver’s license suspended, or get evicted. You can end up bankrupt as a result of poor financial decisions or other factors that are beyond your control, such as unexpected medical bills. Here are five ways you can beat bankruptcy.
Make a Plan to Settle Your Debts
Filling for chapter 7 bankruptcy can be dangerous as it means you may lose all your assets during the liquidation. However, there are ways you can retain some of your assets and continue to pay your debts. Your bankruptcy lawyer can help you come up with a debt consolidation plan that will enable you to pay your debts at a lower interest loan. This involves negotiating with the creditors to make a deal for a reduced payment plan.
You may have to give up some of your paychecks and start paying off the smaller bills as you work up to clear the larger debts. Alternatively, you sell some of your assets to pay some of your debts and keep the creditors at bay. If you have any valuables or antiques, you can sell them to pay off your debts.
Another way you can raise money to pay off the debt includes borrowing money from friends and family. You can also restructure your mortgage and ask for a new payment plan or refinance it for a longer payment period and lower interest rate.
Make a Budget and Start Saving
Getting a handle on your spending habits and saving your money can help you beat bankruptcy. You need to make a budget to figure out how much you are spending each month. Opening a savings account can help you save money. Grow your savings account by consistently depositing a percentage of your paycheck.
Budgeting is not easy, and you may have to live on a bare-bones budget. You may have to make huge sacrifices like skipping vacations, moving to a smaller house, or cutting streaming services. Getting rid of unnecessary expenses and living within your means will help you save more. Your budget can have only the absolute essentials such as food, clothing, shelter, and transport.
Maximize Your Income and Reestablish Good Credit
Cutting your expenses may not be enough to cover all your expenses, and you may need to find new ways to increase your income. You can get a second or third job to maximize your revenue and avoid going bankrupt. This extra money can help you pay off your debts and start to re-establish a good credit score.
Paying your bills on time is one of the easiest ways to start rebuilding your credit. Avoid late payments as this can lower your overall FICO credit score. You can also open a secured credit card backed by your savings account. Other ways to build your credit score include getting credit builder loans and reporting your utility bills and having them in your credit history.
Monitor Your Credit Score
Regularly monitoring your credit reports will ensure that all the information is accurate. Tracking the reports consistently and carefully will help avoid getting inaccurate information that can lower your credit score. There is a chance that there could be errors in your credit which can be a challenge to resolve. If you notice any mistakes in your credit report, it’s crucial you contact the parties that reported the wrong information and the credit bureaus to correct the errors. Ensure you have all the documents and copies to make your case.
Get Professional Help
You can consider getting professional financial help from a financial coach. Some of the advice they can give you is how to improve your saving culture and adopt healthy spending habits. Ensure you do proper research on the person you are getting help to avoid getting someone who will take advantage of you.
You can use these tips to beat bankruptcy and get your finances in order. You can also have an emergency fund to help you pay unexpected expenses that can push you into bankruptcy. Remember that bankruptcy is not your only solution.
