How to avoid filing for bankruptcy and spare your credit

According to finance guru Dave Ramsey, bankruptcy is considered among the top five life altering events in an individual’s life. As much as one might hate it, they may find themselves in a situation where the only solution is to file for bankruptcy. However, by following certain steps, one can avoid having to file for bankruptcy in the first place. Read on to know more about what you can do in order to avoid filing for bankruptcy and spare your credit.

Sell a few of your assets

The first and most obvious step you can take is to sell some of your tangible assets, such as furniture, jewelry and electronics. You can put them up on Craigslist or eBay, or even hold a sale in your yard. Use the money you collect by selling your assets to pay off your debts. Never wait until it is too late. Take action as soon as you notice that you cannot afford to pay the debts any more.

Cut down on your expenses

The next step to take is to cut down on your expenses. Avoid dining out for some time. You might also have to cut down on nice-to-have additions like the data package on your cellphone, your internet package, cable or satellite television and so on. You can easily do away with a few things without a lot of pain.

Work overtime or part-time

If you are doing a 9 – 5 job and are free for the rest of the day, you can use the extra hours to work overtime or part-time with some other employer to earn extra cash. Use this extra cash to pay off your debt.

Get help from creditors

Talk with your creditors and let them know that you are having financial difficulty and can only pay them so much. Most creditors will be happy to get something instead of nothing at all, which would be the case if you file for bankruptcy. The creditor may be willing to ease your burden by lowering the monthly payment. You can also request the creditor to decrease the interest rate. Check to see if the creditor has a hardship program which you can use in such a situation.

Get help from friends and family

Borrowing money from friends and family may create issues in your relationships, but there is no harm in asking. Do all the calculation before contacting them so you know exactly how much you’ll be asking for and how you plan to pay it off. However, before you do this, make sure you pay as much of the debt as possible by following the tips given above.

Get help from a professional

If nothing else works, you can get help from a consumer credit counselor. Credit counseling is a great alternative to filing for bankruptcy. The credit counselor will come up with a debt management plan that will allow you to make the payments.

Go for debt settlement

Although debt settlement should be avoided under normal circumstances, but if you are at the brink of bankruptcy, you can choose to settle your debts. The thing to remember is not to use a debt settlement company. Instead, focus on the debts that have been sent to collection or have been charged off, and get ready to pay a lump sum settlement amount for the remaining debts.

If none of these methods work, you will have no choice but to contact a bankruptcy attorney who will help you file for bankruptcy.

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