Alternatives to Bankruptcy
Bankruptcy is one of those financial fears that we hope we never have to deal with though in some cases it can seem like it’s unavoidable. According to Dave Ramsey, the financial guru, filing for bankruptcy is one of the largest 5 emotional events that an individual can experience along with divorce, death of a family member, or dealing with a severe illness. Luckily, bankruptcy may not be your only option when it comes to reviving your finances.
1 - Debt Snowball
One of the most common types of bankruptcy is known as Chapter 7. This is total bankruptcy, which is when you say that there is no way for you to pay what you owe. This can be particularly dangerous as it may mean that you have to relinquish your assets. Instead, consider using the debt snowball. This is will enable you to pay back all of the money that you owe. With the debt snowball you list all of your outstanding balances and pay them off one at a time, from smallest to largest. You will have to determine that you will make the minimum monthly payments if you are able, but it is likely this will not be possible or you would not have been considering bankruptcy in the first place.
2 - Parting with Valuables
If you’re in a tough financial situation, take a look at all of your assets and determine if there is anything that you can live without. It is important that you stick to the bare minimum to ensure that you can put as much money down on your debt as possible. For example, do you have a second car that you don’t necessarily need? Are there any valuables in your home that you could sell for a pretty penny? Consider using resources such as eBay or Craigslist to get rid of any extra things that you have lying around the house.
3 - Financial Counseling
The best way to figure out how you can avoid bankruptcy is to talk to a professional financial coach. These individuals are highly trained in helping people build a realistic budget and cut costs as necessary. You will go through all of your monthly expenditures and create a budget that allows you to exist while saving as much money as you can to put towards what you owe. They are available to give you advice and options about how you can avoid filing bankruptcy. A financial coach may also be someone that you will continue working with even after you’re out of debt. They are experts in helping you build wealth after you are debt free.