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.
The first step you can take is to get a full picture of your debt load. Start with gathering all of your loan and credit card statements to determine the amount you are paying in terms of monthly servicing costs, interest rate, and total debt. Weigh these bills against corresponding assets, such as real estate in the case of a mortgage. Use his opportunity to determine if there are other assets that can be liquidated to repay debt.
Healthy versus unhealthy debt.
In conjunction with the above, wherever you have an offsetting asset you can categorize the debt as “healthy.” Some examples of “unhealthy” debts include medical bills, car loans that exceed the market value of your vehicle, and credit cards.
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
Since you are in debt, you will need more money to repay the same. The only way to get that money is to increase your income and reduce expenses. When it comes to making a reduction in expenses, even saving a single dollar can make a big difference. If you seriously want to avoid bankruptcy, you should not lose any opportunity to save money – no matter how small it is. Such amounts when accumulated on an annual basis can take care of a good amount of your debt.
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.