Is There Anything I Can Do About Debt to Avoid Bankruptcy
3 min read
Debt can be a very real threat to your finances. Fortunately, there are many options to avoid bankruptcy and repair your debts instead.
One option is to contact your creditors and ask if they will accept lower payments or a payment plan until you can get your finances back on track.
- Get Organized
If you find yourself in debt and are considering filing for bankruptcy, there are a few steps you can take to avoid this option. The first is to get organized and eliminate unnecessary expenses.
The next is to meet with a credit counselor. This service will help you make a plan for getting out of debt and saving money in the long run.
Once you’ve found ways to eliminate non-necessary expenses, create a budget and save a little of your income each month. This will give you a savings cushion to fall back on in case of emergencies.
- Eliminate Non-Necessary Expenses
While many expenses are essential for your daily life, there are others that you can get rid of or cut down on. These are often called discretionary expenses.
These can include gym memberships, extra data on your phone plan, magazine subscriptions and eating out. By cutting these, you can eliminate unnecessary spending and free up more of your money to pay down debts.
Whether you’re a business or an individual, there are some costs that aren’t as important for your survival as other costs like rent, salaries and insurances. These are called discretionary expenses and can be a big reason why you might find yourself in bankruptcy.
- Make a Budget
If you want to get your finances in order, one of the first things you should do is make a budget. A budget is a spending plan that takes into account expected income and expenses for a set period of time, usually one year.
A budget can help you set long-term financial goals, spend within your means, build an emergency fund and avoid risky spending habits.
The first step in creating a budget is to list your fixed and variable expenses. These include rent, electricity and groceries.
Next, decide whether you need to spend on needs or wants. Needs are essential to living a healthy life, like food and shelter. On the other hand, wants are optional or non-essential, like new clothing.
- Make Payments on Time
One of the best things you can do to avoid bankruptcy is to make payments on time. Not only does this help you establish a good payment history with your creditors, it also helps to boost your credit score.
Start by creating a list of all your bills. This should include all lenders, as well as utility and service providers.
When you have this list, contact your creditors and ask if they will be willing to change the due date for some of your bills. Some will be able to accommodate this request, while others may not.
Once you’ve arranged a few due dates, try to keep track of when they are due. Keeping a calendar of payments will allow you to set up reminders to pay them on time.
- Seek Financial Help
If you are struggling financially, there is hope. There are many ways to avoid bankruptcy if you take the time to seek help from a nonprofit credit counselor.
A certified credit counselor can provide a range of resources on budgeting, debt repayment and other options for managing your finances. These can prevent you from filing for bankruptcy and also protect your credit score over time.
The first step is getting organized and keeping your bills, receipts and records in a single place. This will make it easier to keep track of payments and avoid late fees, which can push you further into debt.
