Guide to Avoiding Bankruptcy
When it comes to the reasons to avoid bankruptcy, you are likely aware of the many pitfalls. You probably know that bankruptcy might seem like a fast and easy solution at first glance, since it offers to clear all debt off your plate and put an end to those sleepless nights and harassing telephone calls. So, even though bankruptcy offers some apparent benefits in the extremely short-term, longer-term goals like obtaining credit or getting a new job must often be forfeited as well. This can often mean more problems than simply dealing with the debt and phone calls. With these realities in mind, you should avoid bankruptcy at all costs when possible.
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.
The next step is to categorize the debts as healthy debts and unhealthy debts. This will give you the real picture and you will be in a better position to plan on how to avoid bankruptcy. Medical bills, high-rate car loans, personal loans, and credit card debts are unhealthy debts while home loans are healthy debts.
Create an income statement
After analyzing what your net worth is, consider your solvency. This means taking your income and subtracting all monthly expenses from this amount.
Spend Less and Earn More
One of the most effective tips for getting out of debt involves combining a policy of spending less (thereby reducing your monthly expenses and improving cash-flow) with a policy of earning more income (thereby generating more cash to pay toward the debt). Saving a single dollar every day would result in monthly savings of $30, or $360 per year. When trying to avoid bankruptcy, such savings can be instrumental, particularly if you are able to increase income by the same amount; the end result is doubling available cash flow.
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.
