Bankruptcy occurs when your liabilities exceed your assets or when you have an insufficient cash flow to service your debt. In other words, bankruptcy happens when you don’t have enough money to pay off your bills. Declaring bankruptcy has many consequences and can affect your credit for many years. If you feel that you are on the verge of this, here are a few things you can do to avoid having to declare bankruptcy.
See what you can sell
Do you have unopened or unused items that have just been collecting dust on your shelves? Consider putting those on eBay or having a yard sale to get some extra money. Extra pieces of furniture and collectibles are great for a quick cash turnaround. Fashion items, such as brand-name sneakers, bags, and sunglasses, are also great for some extra money if they are in good condition.
Say goodbye to unnecessary expenses
Cut out any unnecessary expenses, such as gym memberships, streaming services, eating out, and vacations. While this might seem intense, remember that this is only a temporary situation. A few months without the extras will be worth it if you don’t have to declare bankruptcy!
If your current job isn’t enough to pay your bills, consider getting a second job. Even if you only have time on the weekends, the extra cash flow can definitely help you pay off your existing debts faster.
Contact your creditors
While it may seem like your creditors would be the last entity you want to contact, they can actually help you. Many creditors may be interested in helping find a way to settle your situation. They would rather help you settle the situation rather than lose the money they sent you. See if they will lower your interest rate and work out a repayment plan.
Switch to cash
Budgeting your income should become a large part of overcoming your debt. Set a weekly budget for your necessities and pay for them with cash. Put away the credit cards for now and don’t use them until you have more of a grasp on your debt.
Borrow from friends or family
Use this a last resort situation. Borrowing from friends and family can make these relationships when it comes to paying back that money. If you know that this wouldn’t just be a temporary fix, this might be a good solution for you. Make sure that you plan out a repayment plan. Be as clear with the payback terms before you borrow the money.