Guide to Avoid Bankruptcy
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There are several reasons why you must avoid bankruptcy at all costs. In the first instance, it may look like the best solution, as it offers a clean state, freeing one from all the debts that one owes to various creditors and that were almost impossible to pay off otherwise. Still, it is not the right solution because you may get instant relief because of this but in the long run it will make your financial life terrible. You can realize the severity of the consequences with the very fact that it may even affect your future employment. That is the reason why you should do everything that you can to avoid bankruptcy.
These are some of the things you can do to determine the likelihood of avoiding bankruptcy.
Analyze the true status of your debt load.
Since debt is what led you to consider bankruptcy as your only option, start there. Evaluate your debt situation by weighing the true costs, both in terms of monthly carrying costs and total debt. Period. Start with the very same bills and credit card statements and weigh them against any potential assets (e.g. a mortgage will often have real estate as an offsetting asset). What other assets can be liquidated to clear debts?
Healthy versus unhealthy debt.
By listing all of your debt and aligning them with corresponding assets, you can also categorize these debts as "healthy or unhealthy." The purpose of this step is to see just how bad the situation is. If you have plenty of offsetting assets, then bankruptcy probably doesn't make much sense as you stand to lose these items in liquidation. While real estate will offset a mortgage, medical bills, most consolidation loans, and credit cards will not have an offsetting asset.
Create an income statement
Once you are aware of how much money you to owe to others, it is time to sum up your income and expenses.
Spend Less and Earn More
While this might seem like the most contentious piece of advice ever, it makes sense when you look at it in small chunks. Just by saving a couple of dollars a day will result in over $750 in saved expenses every year. If you can increase your hourly wages by the same amount, you increase your after-tax income by at least $2,000. Between the saved expenses and the increase in wages, you will have another $2,750 to repay debt every year. Believe it or not, combining a spend less policy with a nominal raise can accelerate your progress toward a debt-free lifestyle.
In instances where you are unable to find a way to make heads or tails out of your debt levels, consider seeking the advice and guidance of a state-qualified credit counselor. Such a professional can offer unbiased assistance. Alternately if you are unable or unwilling to speak with a professional, considering purchasing an e-book and computer programs that are devoted to improving your personal finances. Such a purchase should cost no more than $50 and can make a world of difference to overcoming your financial problems.
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