How to Avoid Bankruptcy

Categorized: Credit Card Debt Relief | No comments

If you have a lot of debt that you’re struggling to deal with, you might be at a loss for how you can deal with it. If you don’t know how to file for bankruptcy or when bankruptcy is the right choice, it’s easy to assume it’s what you should do, even when it’s not. When you need help with money problems, you shouldn’t jump into anything without knowing your options first.

First of bankruptcy is never the ideal choice. Yes, if you file chapter 7 bankruptcy, you can have most or all of your debts wiped clean. However, there are many downfalls. First, file chapter 7, all of your non-exempt assets will be taken from you and liquidated. Do you have some cash in the bank for emergencies? They’ll take it. Do you have a beautiful antique cabinet that you got from your great-grandmother? They’ll probably take that, too. Unless you’re not attached to any of your possessions, losing your things won’t be fun.

Second, if you file chapter 13 bankruptcy, which you may be forced to do instead of chapter 7 if you have a regular income, you’re still going to have to pay back the debt, and maybe all of it. Why not just pay it yourself? With both types of bankruptcy, you’ll have a severely damaged credit report making it impossible to get any kind of loan and very difficult to rent a place or get a job.

Avoiding bankruptcy will require hard work and sacrifices, but they will be worth it. You will have to follow a budget, which everyone should be doing anyway. You will have to know where every penny is going. Anything that isn’t going toward basic living expenses (ie. food, rent/mortgage, insurance, etc.) should be going toward debt. That means sacrificing entertainment, toys, etc.

You might notice you have a lot of free time on your hands when you’re paying off debt because you’re not going out to eat, going to the movies, or playing with the latest gadget. Use that time to make money to pay off debt faster. Get a part-time job or start your own business.

If you’re really struggling, you might need to move in with someone else, if possible, to put all your rent or mortgage money toward debt. If you can, sell your home to help the cause, assuming there aren’t other problems due to a bad real estate market.

This all seems very extreme, difficult, and no fun, but the truth is, you got into debt because you were careless and irresponsible. You’re paying for your mistakes. The good news is that when your debt is gone, you’ll have more money to save for an emergency fund and retirement, you’ll have learned how to properly manage your money to avoid getting into debt, and you’ll probably have extra money left over to pay for things you enjoy.


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