Debt is a part of any consumer’s life. But when one is no longer able to pay their debt and has no immediate solution to change that situation, one can file for bankruptcy. Although some people see filing bankruptcy as a way out of debt or a start fresh, there’s no denying that your credit score/report would be severely affected and there’s the potential mental and economic toll during and after filing for bankruptcy.
So, say, you’re neck-deep in debt, paying for child support, and you’re not as earning as much in your new job in Santa Fe, New Mexico (NM), here are things you can do to avoid filing for bankruptcy:
Sell the Extras, Only Keep the Essentials
You can sell your jewelry, electronics, books, fancy clothes, and everything else that aren’t essential. Prioritize the basics such as a safe home to live in with the basic utilities. If you can, downgrade to a smaller car or house. Eliminate the “wants” and keep the “needs”.
Lifestyle and Budgetary Change
If you’re on the brink of bankruptcy, a huge change in lifestyle should be made. Live with just the bare essentials — food, utility, etc. One must live on a “bare-bones” budget and only spend on what’s necessary. One should let go of fancy or needlessly pricey food, and buy generic ones that can sustain your health and nutrition. No more spa days, vacations, TV subscriptions, and all those extras that you don’t need to survive. It’s a difficult yet necessary sacrifice that would pay off in the long run, and is ultimately temporary — you’ll get up once this bumpy road is over.
Earn More or Get a Second Job
Or a third, or as much as you’re physically and mentally able without getting sick (and end up with more expenses). Increasing your earning capacity by getting a new job, or perhaps asking your current employer for a raise or promotion could go a long way to paying your debts and avoiding bankruptcy. But you have to make sure that your additional job wouldn’t have you end up in a hospital from overworking and result in more expenses.
Negotiate With Creditors
Filing bankruptcy means that your debts are will be discharged and creditors will no longer be able to collect debt from you (with some exceptions such as taxes, child support, student loans, fines and penalties to government agencies, to name a few). As such, your creditors would prefer that you pay something (a decreased interest or perhaps a longer term), than you filing for bankruptcy and not receiving any money at all. So it’s an option to discuss your creditors regarding your financial status and work out another arrangement that would benefit both of you.
Avoid Debt Settlement, Look for Other Options
Some companies offer to settle with your creditors, but this does not come free. Some companies can ask fees up to 15% of the total debt owed. It seems like an easy way out, but you’re digging a deeper hole for yourself. If push comes to shove, you can borrow from friends and family. Although it’s generally a rule of thumb that borrowing from family and friends is a bad idea and could cause troubles in your relationships, bankruptcy could be the exception to the rule. You just need to properly work out the details of how you’re going to pay them back and make sure that you honor your word.
If you do eventually end up having to file for bankruptcy, knowing that you did all you can to avoid it would give you more peace of mind. It’s not the end, and there’s no shame in it; just keep going and start rebuilding yourself and your credit score.
