There is nothing worse than being declared bankrupt. Most people who file for bankruptcy do so because it is their last option. However, bankruptcy is not the best option especially if you want to get a loan in the future to finance your major projects such as buying a house or a car. You can use the following ways to avoid bankruptcy;
Settle or Negotiate the Debts
When you file for bankruptcy, you will have to part with some of your assets. You can avoid this by paying off what you owe and, thus, get to keep your property. Try to consolidate your debt or settle your debts. Debt consolidation involves taking out a loan to pay off your debts so that you will make just a single monthly payment to the debt consolidating company. This method has advantages such as, lower minimum payments to your creditors and lower interest rates.
With debt settlement, you make an offer to your creditors to pay them off in a lump sum. The lump sum normally covers 40-60% of the total debts. If your creditors accept your offer, you can choose to make the payments in small minimum payments or as a lump sum.
Sell Your Property
If you own valuable property, you might put them up for sale before your bankruptcy trustee determines which of your property should be sold. Contact an appraiser who will value your property then decide what you will sell to pay off your debt. You can sell off clutter on eBay or Craigslist to make money, which you can then use to pay off your debt. Ask your friends if they can give you items that they are not using so that you can hold a sale garage and sell them off. This method may raise little money but it is better than having your property taken.
Borrow Money From Family and Friends
Do not shy away from asking your family or friends for financial assistance. It may prove to be difficult but it may be only your best option. If you look at the long term effects of bankruptcy, you will use all means of raising money to take care of the debts. Before you borrow the money, calculate the total debt and the amount that you have raised. This will enable you to know how much more you will need to borrow. Keep in mind that you have to pay back the money you borrowed from your family or friends.
Restructure Your Mortgage
If you are still paying off your mortgage, then you should consider refinancing it. It helps you to better manage your debts. Refinancing your mortgage enables you to save more money, which you can use to pay off your debt. You can use two methods to change your mortgage payments. The first method involves negotiating with your lender to put you under a new payment schedule. Check if you can work out a new payment schedule with the same terms as the old mortgage. The second method is through applying for a lower interest rate, which will be extended for a certain period of time.
Make Real Sacrifices
Save more money by reducing your expenses. Review your budget and single out unnecessary items. Live frugally so that you can reduce your expenses. Reduce your bills by switching off electricity if it is not in use. The little money you save will significantly reduce what you owe over a certain period of time. If you cannot work out a budget, seek help from a credit counselor.
