The themes of debt and bankruptcy are generally highly disputed problems, with “experts” on both ends of the spectrum. Most will convince you that if you ever have a little bit of difficulty paying down debt, then bankruptcy is the best of all of the various debt solutions available!
On the flip side, there are some who state that bankruptcy is equivalent to theft and that you should avoid bankruptcy at all costs.
As with most things, the answer lies somewhere in the middle. However, there are plenty of things that one can do prior to choosing to file for bankruptcy…
Cut Out All Unnecessary Expenses
If you are considering bankruptcy, the very first thing that you should do is evaluate your expenses. I’ve spoken with lots of people throughout the years who have been contemplating filing for bankruptcy, while, at the same time, enjoying many of the luxuries of life.
If you are in such a desperate situation that you’re prepared to turn your back on the agreements which you have made in the past, then you should first be inclined to strip all of the extras out of your life.
To have a $200/month cable television bill, $350/month eating out, paying lots of money for your kids to learn every instrument and sport ever made, and new(ish) cars for every individual in the household, and after which state that you are too poor to make minimum payments is a joke!
Cut your budget down to the bare essentials and then go after the debt with everything that’s left. This approach takes sacrifice, but it can often allow you to see what is vital to you.
Sell Your Belongings
When you’re in a situation where your debts are escalating, and it appears like there is no solution, take a financial assessment. When you need to know how to pay off debt fast, you need to examine all avenues!
Figure out if you can find any accounts which you’ll be able to sell for cash – you may want to include your emergency fund to this analysis as well. Also, if you own property or any other things which are of value, you should consider selling them so that you can pay off a large amount of debt at once.
It is typically challenging to sell your home or any other treasured belongings, but this will likely give you the boost that your debt repayment plan gravely needs. Of course, if your asset is considered collateral for a loan, you must consider how much you will receive after paying off this obligation.
For instance, if my financial troubles came due to the expense of trying to remodel my home, then that home improvement project may have increase the value of your property; thus complicating the decision even further.
Avoid Bankruptcy By Earning More Money
This is another weapon in your debt repayment toolbox, which is often overlooked. You can first try to earn more money on your current job. Ask for a raise, or aim to work overtime. If those options don’t work, then it could be time for you to look for a higher paying job!
Also, try to use your talent, hobbies, and passions to make money. You can sell the things which you design (I know a number of people who make decent money by making and selling jewelry), give instruction, or even start a website/blog devoted to your passions!
When you are trying to find ways to earn extra money, don’t forget to consider how much savings you will need in case your efforts don’t work out.
Speak with your Creditors
Oftentimes your creditors would prefer to receive some of the money that you owe them, rather than nothing! As a result, they are generally happy to work out an agreement with you in order to get your debt paid. This normally occurs in one of two ways.
This is an option where creditors agree to accept a decreased amount – this can sometimes be 50% or less of the original amount due. If there is no chance that, given your present financial predicament, you can pay down the full amount that is due, this may be a sensible choice for both sides, then debt and bankruptcy will be a thing of the past.
These types of individual voluntary arrangements can be the difference between a lifetime of debt, and a new start!
You can also see if a financial institution would be willing to finance a debt consolidation.
Most creditors have some kind of “hardship program”, which they offer to consumers who are facing financial hardships. If, based on your current financial situation, you can pay back your debt – but you simply need a short-term break – your creditor might choose to reduce your minimum payments and/or your rate of interest for a certain amount of time.
For installment loans, sometimes the lender will take a few of the payments that are currently due (or due over the next few months), and add them to the end of the loan period. If you are behind on your payments at that time, this will make you current in their system. Sometimes, the can actually structure these repayments so that you receive a couple of months of breathing room.
These temporary hardship programs – if offered by each creditor – could be enough to help you to take control of your finances and steer clear of bankruptcy.
Bankruptcy As A Last Option
After considering and trying all of these approaches, you may still be in a position where it is impossible to pay off the money you owe. Oftentimes this is due to the debt which remains after a series of medical emergencies, or even when an irresponsible husband or wife leaves their partner with hundreds of thousands of dollars in debt! In such cases, bankruptcy could possibly be the only way to have a normal life.
Unfortunately, it is impossible to make general statements on an issue this important and complex. Therefore, you must consider your specific financial situation with an expert before making any decisions.
photo by ponsulak
© 2011 – 2016, Khaleef “Fat Guy” Crumbley. All rights reserved.