Facing Bankruptcy? Here Are 5 Tips To Avoid The Process, Including Selling Your House
While having debts can be considered a way of life for many consumers, the inability to pay all of them has serious consequences to your financial situation. That’s because when you can no longer keep up with your outstanding debts, bankruptcy may be your only way out.
Primarily, bankruptcy refers to a legal proceeding that allows individuals or businesses to get out of debt while giving the creditors an opportunity to get repaid. This usually begins with the debtor’s filing of a petition in court declaring that they can no longer pay their debts as agreed originally. From there, the assets will be accounted for and assessed, including the sale of your home which will also be used for the repayment of the outstanding debts.
Also, when the person files Chapter 7 bankruptcy which is the most common type of bankruptcy, the debts will be completely eliminated but such bankruptcy record will stay on your credit report for a long time.
Thus, if you want to avoid this daunting process, below are the five tips to consider from the get-go:
Cut Back On Your Expenses
When you have excessive debts that need to be paid in order to avoid the consequences of bankruptcy, then cutting back on your monthly expenses may be one of the best things you can do. Typically, the main goal of this tip is to set aside as much money as you can for the payment of your debts. Besides, you can’t collect money if you don’t slash your expenses and make serious sacrifices.
That’s why as early as now, think of some ways on how you can cut back on your monthly expenses. For example, things like expensive haircuts and salon services, dinners out with friends, gym membership, and purchase of unnecessary things should be given up until you’re able to secure a considerable amount of money to pay your monetary obligations.
Remember, the more you trim your expenses and prioritize your budget, the easier it’ll be to settle all your debts and prevent the declaration of bankruptcy which may have an effect of getting your house liquidated as well. But if you have no choice other than selling a house after the bankruptcy, be sure to familiarize yourself with the bankruptcy state laws in your area so you can make the process easier and faster.
Sell Some Of Your Assets
Another way to avoid bankruptcy is to sell whatever item you can get rid of so you can use the proceeds of the sale for the payment of your debts. However, if you want to get the most out of this remedy, then you need to take action right away instead of waiting until you’re behind on payments. This is to make sure it’ll not become too late for your financial situation.
For instance, you can have your old pieces of furniture, jewelry, electronic gadgets, and many more sold to raise some money. There are many platforms online where you can sell stuff to a variety of buyers. Although it may be difficult to let go of your personal belongings, your situation will only be temporary compared to dealing with the consequences of bankruptcy to your credit score and your life.
Prioritize The Debts With The Highest Interest Rate
If you’re having a hard time paying off all your debts at once, it’s best if you prioritize how you’re going to pay them. Although the intention to pay off the debts is there, you shouldn’t approach this method randomly. This means having a plan in place as to how you’re going to get out of debt before it becomes too late.
When you plan the payment of your debts, be sure to pay attention on the one with the highest interest rate. Try to make minimum payments on your absolute necessities and raise as much money to pay off your highest rate loan. Once you’ve fully settled it, you can now move to the next highest until you clear them off your financial record. By doing this, you’ll have a higher chance of avoiding bankruptcy, getting your house sold, or negatively affecting your life in the long run.
Seek Help From Family And Friends
In most cases, asking financial help from family and friends may not be a good option. When not done correctly, it can be a cause of conflicts and strained relationships. But if you want to avoid bankruptcy, borrowing money from your loved ones can be a solution.
Make sure you compute the amount of money you need to get away from the brink of filing for bankruptcy. Also, think about how much you can contribute for the payment of your debts and then ask them to provide for the difference if they can. Lastly, before you appear in front of their doors, be sure you have a good repayment plan with you to assure them that you’ll pay once your financial situation becomes better. Doing so can provide you with peace of mind knowing you can get rid of bankruptcy and the possibility of a house sale even if you get the most value from it after the proceeding.
Negotiate With Your Creditors
As soon as you realize you can no longer pay off your debts, you should speak to your creditors and enter into a negotiation to avoid facing bankruptcy. While this method is no guarantee, some of your creditors may agree for a reduction of the interest rates and fees or even a change of payment terms.
Whatever you and your creditors have agreed upon, it’s much better than filing for bankruptcy and dealing with the not-so-good financial consequences for a long time. However, you should also remember that any negotiation with your creditors is final and executory and you have to stick with it since most of them may not be willing to negotiate your debts for a second time.
The Bottom Line
Realistically speaking, the way you deal with your debts may not be the same way others handle theirs. Sometimes, filing a chapter 7 bankruptcy can be the perfect option for a particular individual but it may not be a good solution for you.
Therefore, before you give up on your financial situation, consider the tips mentioned above and you’ll have the tools that can help you avoid the entire bankruptcy process and get your house sold.