Estimated reading time: 3 mins
Most people fear filing for bankruptcy because they think it is a bad idea. The shame, the guilt and fear associated with bankruptcy has a negative impact on the life of the affected people. In addition to this, it can also affect the borrower’s credit score. It is for this reason that you find people doing everything possible to avoid it even if it is not easy. Most people cannot live without debts. Filing for insolvency is one easiest, most effective, and quickest ways of getting out of debts. Individuals who have successfully filed for bankruptcy should look for alternative ways for improving their credit score.
This write-up is going to share the proven tips for avoiding bankruptcy.
Paying Your Debts
Make an effort of paying your debts on time. Borrowers who fail the means test for a chapter should pay off their debts to save their assets. Budgeting can help you in cutting out some expenses like cell phones or satellite television. These are some of the things that you can do without. You can also diversify your income by looking for part-time jobs or working overtime. Additionally, there are some skills or hobbies that can assist you in getting extra money to pay your debts. Ideally, people can avoid filing for bankruptcy by working hard to pay their debts.
Selling Some Assets
Borrowers can sell some of their assets and use part of that money to pay off their debts. Some of the assets that you can sell include jewelry, electronics and furniture. This is a suitable solution for those people who can’t afford to pay their debts. Even if this is one of the radial ways of avoiding bankruptcy, you should learn how to adjust without these things because this is only temporary. Most creditors will not hesitate to take action on individuals who fail to settle their debts.
Creditors Can Assist You in Avoiding Bankruptcy
Borrowers should discuss their financial matters with their creditors whenever they have financial difficulties. In essence, they should express their willingness to pay their debts. Most creditors can ease your burden by decreasing the interest rates or by lowering your monthly payments. Otherwise, there is no need of getting stuck with high minimum payment yet you are in a hard program.
Getting Help from Friends and Family Members
Borrowing money from friends or family is another wise idea, but there is a risk of ending your relationship or creating hardships. However, remember that bankruptcy is a rule that has an exception just like the other. Once you have identified how much money you can raise towards paying your debts, you should ask your family or friends to assist you in making up the difference. It is advisable to come up with a plan of repaying these debts before approaching them.
Seeking Credit Counseling From Other Consumers
Borrowers who are not in good terms with other creditors can seek help from other professionals like credit counselors. These professionals can negotiate on your behalf to ensure that your interest rates and payments are reduced. Furthermore, there is a new bankruptcy law that requires borrowers to seek help from credit counselors before filing for bankruptcy.
Settling With Debt Collectors and Creditors
Settling your debts is another essential thing that you should try. However, you should avoid using debt settlement companies since some money will go to those firms. Making minimum, consistent payments is one of the best ways of keeping your payment in good standing. Ideally, you should focus on those debts that have been sent to collection companies.
Borrowers can rebuild their credit score and avoid bankruptcy by following the tips discussed in this article. It is also important to make an effort of repaying your debts. You can save money to pay your debts by budgeting and selling some of your assets.