Declaring bankruptcy is often the only option someone has. If you’re struggling with debt, it’s hard to think of anything else. Surprisingly, only three percent of bankruptcies are now filed by businesses; individuals file the remaining 97 percent.
From negotiating with creditors to cutting your expenses, there are a couple of methods for avoiding bankruptcy. This process can have a devastating impact on your credit score and even leave you homeless. Additionally, everything you file with the court will become available to the public and affect your privacy.
The simple thought of bankruptcy can take a toll on your life. Before making a final decision in this regard, assess your options and try to find a better solution.
Here are five things you can do to save your credit and avoid going bankrupt:
Reduce Your Expenses
Analyze your budget and try to figure out where your money is going. Keep a spending log and write down your expenses. Create separate categories for each.
Consider how much money you’re spending on food, water, car maintenance, and rent. Don’t forget about small expenses, such as bus tickets and meals out. Over time, these costs add up.
Next, reduce or eliminate unnecessary expenses. Do you need cable TV? Cancel your subscription and go online to watch movies and reality shows.
Let’s talk about dining out. Think about how much you could save by cooking your own meals and buying food in bulk. Takeaways aren’t cheap either.
Sell What You Don’t Need
To further maximize your savings, sell everything you no longer need or use. This may include your TV, old laptops, furniture, clothes, and even toys.
Most people have lots of stuff that they don’t need. Since you’re not using it anyway, why not sell it for some extra cash? If you end filling bankruptcy, you risk losing everything you have.
Prioritize Debt Repayment
Perhaps you can’t pay all your debts in full, but you can make small payments every month. Determine how much you owe, come up with a plan, and stick to it.
Prioritize high-interest debt and secured debt. Try to negotiate with creditors and reach a compromise.
Consider using the debt snowball method to pay everything you owe over time.
This strategy involves paying down the account with the smallest balance first while making minimum monthly payments on larger debts. When that small debt is gone, move on to the next one on your list and repeat until you’re done.
File a Consumer Proposal
A consumer proposal is an agreement between you and your creditors. Basically, you will only pay a portion of your debt so that collectors can no longer contact you for repayment.
Contact a debt relief expert, such as Hoyes, Michalos & Associates, to help you file a customer proposal. They will explain to you how this option works and determine if it’s right for you.
Beware that a customer proposal will affect your credit score. However, you’ll no longer pay interest or risk losing your assets.
Supplement Your Income
One of the best ways to avoid bankruptcy is to get a second job or start a side hustle. Assess your skills and find a way to monetize them.
Let’s say you’re good at motivating people and helping them reach their full potential. In this case, you could work as a life coach. Set up a website to promote your services, start a blog, or join a dedicated platform, such as LifeCoachHub.
Perhaps you have strong writing skills? Sign up on Fiverr and other freelancing sites, contact creative agencies, and join Facebook groups for copywriters and content creators. Use the extra money to pay off your debt.
Avoiding Bankruptcy Is Not Impossible
Remember, it’s in your power to develop healthier money habits and get out of debt. Avoiding bankruptcy is difficult, but not impossible. Maximize your revenue, minimize your expenses, and stick to your budget.
For more information on finance and money, check out our other blog pots. We’ll show you how to secure your kids’ financial future, how to save money when shopping online, how to bring in extra cash, and much more!