Four Best Ways to Avoid Bankruptcy

Credit and debt seem to be an inevitable part of life. For many, their spending habits and debt management practices leave them one paycheck away from bankruptcy. Filing for bankruptcy is a long, painful process that will have long term consequences, making finding an alternative a better option for many. Here are four alternatives to filing for bankruptcy that can eliminate debt and get you back on the road to financial stability.

Selling Off Assets

One of the fastest ways to come up with extra cash is to sell things that you don’t absolutely need to survive. While this may seem harsh and can be difficult to swallow, selling your things can help you raise the cash you need to pay off your debt and avoid bankruptcy. You can sell a variety of things on eBay, Craigslist and even locally through classified ads. Try to sell items of value such as consumer electronics, jewelry and other items that people will want in order to sell them quickly. Use this cash to pay off debt and nothing else. While it might seem extreme, it will help you avoid bankruptcy and save your credit.

Pay Off Your Debt

Do you make enough money to pay your normal living expenses and put some toward your debt? If so, creating a disciplined budget and paying off your debt the old fashioned way can keep you out of bankruptcy court. Take a look at your monthly expenses and see what you can do without. Things like expensive cable TV, Internet and cell phone plans can be pared back and even eliminated entirely in order to lower your monthly expenditures and get you back on the road to solvency. If you are already barely living on what you bring in, consider taking on extra hours or even an extra job if you have to. Dedicate your new income to solely paying off debt.
In addition to putting more money towards your debts, consider putting in a call to your creditors and explaining your situation and asking for their help. Believe it or not, your creditors don’t want you to file bankruptcy because when you do, they face having to record a loss on their balance sheets. This means they are likely to lower your interest rates, eliminate fees and even forgive a portion of the debt in order to help you pay off your debts.

Get Help from Friends

This is an especially hard pill to swallow and can even create some strained relationships. But, if you have family or friends that are in a position to help you, it might be beneficial to swallow your pride and ask for a loan. You will need to explain how you will pay each person back and provide a contract in writing so that understand how and when they will be repaid and it’s important that you honor these obligations in order to prevent hard feelings.

Get Professional Advice

When you are in the tough circumstance of considering bankruptcy, you should know your options. You can find bankruptcy law firms like All Family Law Group, P.A. and others who can advise you on bankruptcy details as well as let you know of the best alternative options. Be careful when selecting firms, however, as the company should not ask for large upfront costs or excessive consultation fees. Most legitimate firms will offer counseling for free or a very low amount.

Settle Outstanding Collections Accounts

For debts that have already reached collections, it might make sense to settle with the collector and take a hit on your credit rather than filing for bankruptcy protection and taking an even bigger hit. The good news is that these debts can be paid and resolved for less than face value when they reach this point, making them easier to pay off. Contact the collection company, make an arrangement and then make the payments.