You probably realize that there are numerous reasons for you to try to avoid a bankruptcy. Oftentimes, bankruptcy may look like one of the simplest and most efficient options. After all, bankruptcy will allow you to clean the slate and start out fresh again. You can eliminate your current debts that seem to be burying you.
While bankruptcy certainly does have a few advantages, it may not turn out to be the solution you had expected. In the long term, it is possible that a discharged bankruptcy could cause even greater nightmares. You may not be able to obtain credit and you could be denied a new job. You should do all that you can to avoid going bankrupt if possible.
Here are some suggestions that may be able to help you to avoid making a big mistake.
Prepare a full record of your debt load.
The first thing that you have to do is to total all your debts. Many people facing financial problems tend to deny many of the problems. You must have a full knowledge about the total amount of money you owe to your creditors. You should do this by gathering all the documents together that affect your financial situation in any way, including bank statements along with bills. Your mortgage is a debt for you but provided you owe less than the value of the house, your home can be considered an asset. If you owe more than your home is worth, it can only be considered a debt.
Healthy and Unhealthy Debts
Typically a debt on an appreciating asset is considered a healthy debt. In the past, home loans were most often considered to be a healthy debt. However, that is not necessarily true anymore in many of the real estate markets in the United States. Until the housing market turns around it is up in the air whether your home is a appreciating asset or not.
However, medical bills, credit cards, car loans and personal loans can usually always be considered to be unhealthy debt.
Make a Budget
Take your total monthly income and subtract your monthly expenses. If you have money left over after everything is paid, great. If you don’t, consider areas that can be adjusted so that you can have some additional disposable income left over. With the extra you can pay down your debt.
Earn More and Spend Less
This makes sense is you look at it rationally. By saving just $2 evey day you will have saved over $750 in a year. If you can possible increase your hourly wages either by getting a raise, or by supplementing your income on the side by the same amount, you will have increased your after-tax income by about $2,000. Between the savings and the increase in wages, you will have an additional $2,750 to pay towards your debt every year. Combining a spend less policy with even a small raise in income can accelerate your progress toward a debt-free lifestyle provided you use the additional money to pay towards your debt.
In instances where the debt load is insurmountable, you may consider seeking out the advice and assistance of a state-qualified credit counselor or investing in a book, e-book or software program that can assist you in controlling your finances.
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