While it takes a great deal of pride to ask friends and family for money, it is sometimes the only way to keep creditors at bay. Borrowing money from loved ones can be a last resort, and should only occur after all other options are exhausted.
Many consumers aren’t aware of the less drastic options available to them to avoid bankruptcy. If you are facing bankruptcy, be sure to seek help from a Harrisburg bankruptcy lawyer for legal help. Otherwise, here are four preventative measures to consider to avoid bankruptcy.
1. Have a budget in place
A lot of people end up in financial trouble because of things out of their control, like unexpected medical bills or job loss. However, a good budget and debt management plan can help you avoid bankruptcy altogether.
Start by identifying your regular monthly expenses, such as housing, food, transportation costs and debt payments. Subtract these from your income to see what you have left. You can then figure out how to reduce your expenses, which may include negotiating with creditors, switching to cheaper phone plans or insurance policies, finding ways to save on utility bills and cutting back on nonessential spending.
Once you have a budget in place, it’s important to stay on track by getting your paperwork together and being organized. This will make it easier to pay your bills on time and avoid late fees. To do this, create a folder or desk drawer to keep all your bills, credit card statements and pay stubs in one place.
2. Get a second job
Many people have to make the difficult decision between working more, maybe taking a second job, or filing for bankruptcy. This decision can affect their family and lifestyle in different ways, so it’s important to weigh the pros and cons of each option carefully.
Getting a second job is one way to increase income and speed up debt repayment. However, it’s important to consider the non-financial costs of additional work as well. For example, working more can interfere with family time and may cause stress for the entire household.
Having a budget in place is also crucial for avoiding bankruptcy. This can help you determine what expenses are “needs” and which are “wants.” You might be able to cut back on some of your monthly bills by eliminating services like cable and internet or by eliminating expensive food choices. In addition, you might be able to lower your mortgage payments by talking to your lender.
3. Ask for help from family or friends
Sometimes, asking for help from family or friends can be a great way to alleviate stress. Although it may be difficult to swallow your pride and ask for money, you
might find that your loved ones are more understanding than you first assume. Additionally, you can also earn extra cash by selling belongings, working a second job (such as babysitting or pet-sitting), or delivering newspapers.
You can also consider cutting back on nonessential spending. Eliminating unnecessary expenses like a costly cable TV or movie channel subscription can free up funds to funnel toward your debt. In addition, you can look into reducing your monthly bills by calling your creditors and asking about a reduced payment plan. Many debtors are willing to negotiate, especially when they know that you’re considering bankruptcy. You can even work with a credit counselor to learn more about financial basics and budgeting. These preventative measures and last-ditch moves can make all the difference in avoiding bankruptcy.
4. Talk to your creditors
Creditors and lenders aren’t going away, so the best way to avoid bankruptcy is to make paying them a top priority. This may mean cutting nonessential spending to free up funds and funnel them toward debt payments, or it could mean seeking professional help to negotiate new payment terms or settle credit card debt with creditors.
Be sure to keep accurate financial reports, as even a minor error can have severe consequences. In addition, if you find that you have debts that can’t be paid, you should act quickly and speak with your creditors to see if they will agree to reduced payments or other arrangements.
It can be tempting to turn to family and friends for assistance, but this is a risky move that can strain relationships. Plus, you could wind up with a loan that’s not fully repaid, and this will also show up on your credit report. Instead, seek professional advice from a reputable credit counseling service to get the help you need.
