The word “bankruptcy” brings up a lot of negative emotions for most people, as it carries a heavy stigma, and it can be a long road to getting back on your feet.
While there are many people who choose to file for bankruptcy (nearly 800,000 in 2016), there may be things you can do to avoid filing yourself. This post will look at ways to help you evade a bankruptcy claim, as well as how to rebuild if you realize that you cannot get out of filing.
Look at your spending habits
It is not always fun to dive deep into how you are spending your money, but if you are on the verge of bankruptcy, it is a good place to start. Try setting up a budget to make sure you aren’t spending money on things you do not need. For example, if you are constantly going out, consider setting a grocery budget and making more meals at home.
Sell the non-essentials
To make extra money to pay off debt, find things that you can sell. Getting rid of an extra car, downsizing homes and selling clothes you do not wear anymore are great ways to quickly gather money. Selling non-essentials can help you pay off debt fast.
Borrow, if you can
Asking your parents, siblings or friends for money can seem difficult, but oftentimes they will understand, especially if it will save you from filing for bankruptcy. Making sure to come up with a repayment plan can prove beneficial when asking friends and family for financial aid.
If you cannot avoid bankruptcy…
Do not worry. Filing for bankruptcy is not the end of the world and there are ways to reestablish your credit. Bulking up your credit score after bankruptcy is a great way to get you in a good financial situation.
- Open a secured credit card: Secured credit cards, unlike unsecured cards, require a deposit when you are opening the account that will act as your borrowing amount. By securing the card with a deposit, you will look like a less risky borrower, which can help you stay afloat.
- Monitor your finances: Many people end up filing for bankruptcy because they were not self-aware financially. Making sure you set up a budget as well as looking at where your money is going often can help you pay your bills on time, make sure you aren’t spending money on things you don’t need and know what your credit score is.
- Save when you can: To avoid a situation where you cannot make a bill payment on time, put money away in a savings account. That way, if you find yourself short on cash one month, or you have a unique medical expense, you can cover the bill with money from your savings.
The topic of bankruptcy can be daunting and confusing, but it doesn’t have to be. Having a plan in place for avoiding bankruptcy and knowing how to recover if you do file for bankruptcy is essential.