In today’s world debt is a part of consumer life. If you purchased a home or vehicle, it’s likely you obtained a loan to buy them and now your monthly income is used to pay down those debts. We use debt to purchase common everyday items, making it quite easy to overspend. Overspending can likely be the source of debt problems.
When faced with debt problems, it can be difficult to climb out and can feel like you have no options left. However, there are several avenues that can be explored before considering bankruptcy. What does it mean to file for bankruptcy? Essentially, you are telling the court that you cannot pay your debts. Filing for bankruptcy has many advantages to it but the negatives should also be considered. For example, if you file for bankruptcy, you might not be able to buy that dream home of yours in the next 6 months. However, the flip side of that argument is that unless you’re able to eliminate that debt, you likely wouldn’t qualify for a home loan regardless.
It is also important to know that bankruptcy does not discharge certain debts, excuse you from certain lawsuits, etc. For example, if a person is facing $30,000 of unpaid child support or $50,000 of student loan debt, filing for bankruptcy very likely would not eliminate those obligations.
Bankruptcy, although can provide much needed relief when dealing with debt problems, you may want to consider exploring other options first. There are ways to avoid having to file for bankruptcy. When faced with serious debt problems, it requires one to take a hard look at their personal expenses and prioritize.
Therefore, consider the following:
- Focus on what is necessary
Prioritize your debt and create a plan. When evaluating your financial responsibilities, the most important thing is to take care of your basic necessities first. Part of focusing on the necessities in life requires you to distinguish between your wants and needs. The basic necessities include food, shelter, utilities, transportation, and clothing. With that being said, you want to make sure your mortgage is current and food and utilities are taken care of. You may even want to consider moving into a smaller home or driving a less expensive car.
- Sell Your Stuff
Materialistic items that you do not need or do not use often should be sold. This can include furniture, TVs, or a boat you use once per year. The money you acquire from selling these items can be used to pay down your mortgage or used for your car payment—avoiding losing your home or means of transportation.
- Create a Budget
Curb your spending. Budgeting is key when trying to avoid bankruptcy. This means considering less expensive cell phone plans, not eating out at fancy restaurants, or taking any lavish vacations. Also, you may think about purchasing alternatives to expensive brands when grocery shopping or making coffee at home rather than going to your local Starbucks. Moreover, consider canceling that gym membership or highspeed internet. Although it might be difficult if you are used to such luxuries, remember that budgeting is short term and can be modified as circumstances change. It is not worth having your car repossessed or home foreclosed on because you want to spend your money on luxuries rather than paying down your debt obligations.
- Find A Second Job
You might want to consider finding a second job to generate some additional income. It is quite common nowadays for one to have a second job. The additional income can help pay off those additional expenses that you could not afford to pay otherwise.
- Financial Counseling
Seek help from experts—turn to someone, a professional, who can provide you financial guidance when you are faced with money issues. Although it can be difficult to reach out for help, it can provide a great advantage in restructuring your finances to avoid bankruptcy.
- Ask Your Family or Friends for Help
Some people consider asking a family member for financial help. Although asking to borrow money from family or friends can be a hard request, it might be worth considering. Once you start budgeting and getting your finances in order, you will know how much to ask for and how you will be able to pay back your family along with your creditors.
- Speak with Your Creditors
Speak with your creditors to see if you can settle your debt. Inform them that you are having financial difficulty and want to avoid filing for bankruptcy. Banks and credit card companies have programs intended for those suffering from financial hardships. Take advantage of these opportunities if they are available to you. However, be ready to pay a one-time settlement amount if the parties reach an agreement.
Avoid debt consolidation services. Generally, these types of services are offered by for profit companies. As such, there have upfront fees for their services which can be quite costly depending on how much debt you have. These services do not truly offer much relief for their client’s debt problems. Therefore, there is no real benefit to pursuing such services.
Climbing out of debt is a real sacrifice. By living within your means and spending less than what you earn, you will see the savings add up. As such, consider trying some or all of the above suggestions. We understand that there is no real quick fix or easy solution when climbing out of debt. Moreover, every situation is different. However, certain lifestyle changes can make all the difference before making the decision to file for bankruptcy.
When all else fails and you are considering whether to file bankruptcy, you should discuss your financial situation with a highly trained bankruptcy attorney. Here at Sacramento Bankruptcy Lawyer, we would love the opportunity to discuss your case with you and assist you in choosing the most beneficial option.
We help clients in the following areas: Sacramento, Elk Grove, South Sacramento, West Sacramento, Natomas, Citrus Heights, Antelope, Fair Oaks, Gold River, Rancho Cordova, Roseville, Rocklin, Lincoln, Wheatland, Yuba City, Marysville, Woodland, Davis, and Lodi.
