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Let’s talk about avoiding bankruptcy and what you can expect to happen in each situation. Some options are more favorable than others and once you’ve explored all of your options for getting out of debt, you may find bankruptcy to be your best fit.
1. make more money
It’s really a no brainer. When you’re looking to get out of debt and avoid bankruptcy, the best thing you can do is earn more money. I know, it’s easier said than done, but have you really found creative out-of-the-box ways to increase your monthly income? Here are some of my tips that have helped past clients:
- Rent a room to make rental income;
- get another job;
- Ask for a pay raise in your current job;
- Put children to work and stop paying their expenses if you are working;
- Have a yard sale, or sell items you no longer use on Craigslist;
- Start a Side Business Repairing or Reproducing Items for Resale
2. cut costs
There are only two sides of the budget ledger; income and expenditure. Another great strategy is to not only increase your income, but also cut down on expenses. Any money left over can go towards paying down debt and avoiding bankruptcy. Here are some oft-overlooked ways to cut expenses:
- Transportation: Cut down on transportation costs by taking public transportation to work. You will be surprised to know that taking public transport will reduce your stress. If you plan to drive, make sure your car is well maintained and paid for. Maybe you need to downsize and get a cheaper car that you paid for to cut down on the car payment.
- Insurance: Home and auto insurance costs can be cut by examining the amount and types of insurance policies you have. If your car is older, consider cutting any physical damage coverage (comprehensive/collision) and maintaining only liability. The liability limits on insurance policies should only be sufficient to protect your assets. Therefore, if you do not have equity in your car and home, you do not need a high limit insurance policy. Also, shop around for insurance.
- Utilities: Turn off lights and air conditioning. Cut down on that cell phone bill, or disconnect that land line. Call each company for reduced services that will lower your bills, or reduce them altogether.
- Groceries: Start couponing by buying your shampoo, soap, toothpaste, dish and laundry items at Coupons. Paper products are another great household item to buy with coupons. Cut your grocery bill by planning your weekly meals before shopping and considering other meals you might use the same ingredients for. Cooking at home can not only save money because it’s cheaper than eating out, it can also help you stay healthier.
The consequences of budget tightening by increasing income and reducing expenses is that it is a long term lifestyle commitment that may take more than five (5) years to pay off all of your debt. Even after maxing out this strategy and applying all of your disposable income to debt, it may not be enough and you could still face bankruptcy. However, I still believe that knowing your numbers is an important step in financial transformation and debt elimination, regardless of the direction taken.
3. debt settlement
If you are behind on credit card payments, they can be negotiated; Sometimes for pennies on the dollar. This may sound like a money-saving strategy, but could end up hurting your credit score later. First, you’ll need a hefty savings account so that when you make a deal, you can pay off the loan in one lump sum. Be sure to get any agreement in writing and ask them to remove the trade line from your credit report. You may not get a credit clean-up, but it doesn’t hurt to ask. This can be an effective debt elimination method if you only have one or two debts to work with. more and a bankruptcy case Would be a cheaper, better, faster way to get out of multiple debts at once.
The consequences of debt settlement are that not only will you be paying off the debt, your credit may be negatively affected as a result.
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