Did you know that around 750,000 people go bankrupt in the US each year? While bankruptcy levels are falling, it is becoming even easier to get embroiled in debt. But do you know how to avoid the final result, bankruptcy?
Even when it seems like the end is near, you can still employ some tactics to get your finances back on track. Read on as we discuss how to avoid bankruptcy.
1. Sell Assets
You are quite likely to have accumulated assets on your way to this point. By selling them off, you can use the money to clear a large chunk of the debt. This could help stave off bankruptcy.
Make sure items and assets you sell do not impact your current ways of living. For example, don’t sell a car you need to travel to and from work in. Instead, sell large items and downsize, using the excess cash to clear debts.
2. Cut Spending
The next step is to create a spreadsheet. Add your spending for the month, including bills and luxuries. Try to identify ways in which you can cut back on your spending.
Once you have this, bring in strategies to reduce your spending. Get rid of credit cards. Cut spending on luxuries and entertainment.
3. Communicate with Creditors
When you owe money to creditors, you will be given a timescale in which you can pay back debts. If you ignore the creditors, they will come looking for payment in the form of assets. This brings you one step closer to filing bankruptcy.
This is not what creditors want, because they won’t get what they are owed when you do go bankrupt. Instead, talk to them and arrange payment plans. They may be able to give you added time or come to an alternative arrangement.
4. Increase Your Income
Once you have cut back, to avoid calling the bankruptcy attorney, you need to increase your income. This extra money needs to be used specifically to clear away debts and pay off creditors. Do not increase your income and spend it on other items, leaving yourself in the same position.
One answer is to get a second job. If you have a partner, get them to start working on one as well. While it may be hard and take up the spare time you have together, it will go a long way to helping you out.
5. Consider Consolidating
If you are able to qualify, you may be able to get a larger, lower-interest loan to pay off high-interest debts. However, this should be a long-term solution. If you will start spending once again once you do not feel the pressure of debt, then avoid this method.
You can also consider debt settlement. This is where a debt relief company negotiates with creditors. A smaller amount is paid off and the debt is settled, usually, in the knowledge, they will get nothing if you go bankrupt.
Speak to an Expert on How to Avoid Bankruptcy
Now you know how to avoid bankruptcy, speak to an expert. A financial advisor may have other methods that you can combine with these tactics.
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