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Six Sane Ways to Avoid BankruptcyJune 21, 2018
Today, a large number of consumers are neck deep in debt, and the answer to such a predicament for most people is filing for bankruptcy. However, given that this action has such a devastating effect on your credit score, bankruptcy is a last resort. Before taking this drastic step, it is best to explore some of the options listed below. These may be a little expensive or take a while longer, but they can help you salvage your credit.
1. Put Some of Your Assets on Sale
No one wants to part with their possessions; nevertheless, selling some of your stuff, such as jewelry or electronics, on eBay, Craigslist or even in your front yard, can help you gather enough money to pay off your debts. Don’t wait till you are behind on payments before taking this step. Do it as soon as you find that you are no longer able to meet your financial obligations
2. Decrease Your Expenses or Increase Your Income
Sometimes, it is possible to pay your way out of debt simply by cutting down on some avoidable expenses such as eating regularly at restaurants, drinking at bars, and monthly bills for services you subscribe to that you can live without. Another option is to enhance your income by working part-time or overtime.
3. Negotiate with Creditors
If you talk to your creditors, they may be willing to reduce your interest rates or lower your monthly payments. This is because most credit card companies and banks would prefer to receive some money, rather than nothing at all. Most have hardship programs to help their clients come out of this kind of situation. Nevertheless, before you sign up for such a scheme, make sure that you really are benefitting from it, or you may find yourself stuck with more even more adverse terms.
4. Opt for Consumer Credit Counselling
In case you are unable to strike a deal with your creditors by yourself, you can seek professional help. As per recent bankruptcy laws, you’ll need to enlist the services of a credit counselor before you can file for bankruptcy anyway, so it’s best to start early and look for one who can help get your interest rate and payment reduced.
5. Ask Your Friends and Relatives for Help
Under normal circumstances, asking family and friends for financial help is a big no-no, as it can harm relationships. However, in this case, you might make an exception. Figure out how much money you can get together yourself and then request your family to make up the difference. Nevertheless, before you approach your near and dear ones with such a proposal, make sure that you have a plan in place as to how you will repay them once your finances are back on track. And then stick to it - your relationships may depend on it!
6. Debt Settlement
Consider this a second-to-last resort. If you need to choose between settling with debt collectors and creditors or filing for bankruptcy, then the former is a better option. When executing this process, make sure that you keep a few things in mind.
- Don’t settle any debts that are current; instead, concentrate on those that are charged off or have been sent to collections.
- Be prepared to pay the lump sum payment immediately - as soon as the agreement has been finalized.
By following one or more suggestions on this list, it is possible that you will succeed in coming out of debt without filing for bankruptcy. However, once you are out of danger, make sure that you never have to face this predicament again. One of the main reasons why consumers accrue debt is because they take huge loans on adverse terms, such as abnormally high interest rates. Then, when they are unable to repay the principal along with interest, they fall into debt.
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