6 Tips to Avoid Bankruptcy

Living through financial difficulty is one of the harshest things a person can go through. Sadly, this is something that most people will face in their life at some stage. Still, there is a big distinction between experiencing a mere financial roadblock and struggling with long-term revenue deficits and severe debt. If you face the latter, you will have difficulty buying things that others take for granted, such as getting a roof above your head or being able to cook nutritious meals.

Bankruptcy is a perplexing action to consider. Although it often results in successful debt relief, it may have drastic effects for your credit record up to ten years since the finalization of the bankruptcy. An individual should then only file if it is absolutely required. Given the significant effects of bankruptcy, including collateral damage and the effect on the reputation, this should absolutely only be viewed as a last resort. Below are few ideas to better protect against bankruptcy.

Cut Spending

The first step of the transition is finding out how much money you make per month. The fastest and simplest way to keep a grip on your financial patterns is by placing a budget together. The next move is to reduce expenses. Immediately stop using credit cards, and use cash for as many transactions as you can. If you can’t handle an all-cash existence to support your lifestyle, the next step of your initiative will be to downsize your lifestyle.

Maximize Income

Even if you have reduced your expenditures, you may not receive enough income to cover all of your living expenses. If this is the case, then it’s time to increase your income. The clearest way to achieve so is to find a strong career path. If this is not enough, you may want to take a second or third job. The same holds true for your partner.

Negotiate with your Creditors

So soon as you know you can’t fulfill your monthly payment commitments, you can notify your creditors, Bauer-Simmons said. There is no guarantee, but in some cases creditors agree to lower interest rates, change the terms of payment, or lower fees. “Some income is safer for the credit card firms than no income,” said Bauer-Simmons. If you are bilingual or prefer to speak Spanish only, you can consult with Spanish bankruptcy lawyer Walter Benenati in Florida to help you go through the process.

Avoid debt settlement services

Debt arbitration programs are provided mainly by for-profit firms and pay a premium to reach a deal with the creditors. Some firms pay for the payments up front, according to Consumer Reports, and these may reach up to 15 percent of the debt’s overall value. And in most situations, according to User Surveys, the businesses give no substantial relief from the debt problem to their customers.

Consider Getting a Second Mortgage or Reverse Mortgage

If this all fails to operate, another potential solution may include a reverse mortgage. If getting a reverse mortgage wlil get you out of debt and bring you down the track to a healthier financial situation, it might be worth it. You’re basically placing your house “on the table” for this decision and it’s not to be taken lightly. You should definitely consider this option closely. If you default, or start racking up more loans, it may have severe repercussions.

Simple Ways You Can Stay Out Of Debt

Debt – the ominous word that hangs over us all. It is so easy to have payments due to a number of individuals or institutions. One does not need to live frivolously to have overwhelming amounts of remunerations to make. The simple act of trying to keep your head above water in tough economic times can lead you down the path of debt.

Fortunately, there are some things that you can do to stave off this terrifying concept. A few adjustments to your lifestyle will help you get on the right track to staying away from the clutches of debt. You can always get advice on your finances from experts such as a Phoenix bankruptcy attorney if you need a helping hand. Here are some ways that you can prevent debt in your life:

A Financial Plan

The first thing you need to do is get a stock of your income and your spending habits. It is time for you to come up with a financial plan for your life. For the duration of a month, collect all your receipts and note down all of your expenses and purchases. At the end of the month, gather all of this information and sit down with a calculator. This is how you tailor your spending habits.

At the end of the month, you should endeavor to have a little balance from your income. To do this, you must spend less than you earn. This is why it is a good idea to look at what you are buying. How many of those goods and services do you actually require? Once you stick to the items you really need and trim the excess, you will find yourself spending less money on unnecessary things.

Avoid Monthly Installments

Many companies and retailers tend to lure customers in with easy and prolonged payment plans. They allow you to purchase a product and then let you pay back the amount in monthly installments. There is, of course, a considerable amount of interest added to each of these repayments. You end up spending a lot more money than you ever intended. The alternative to this is to simply save up for whatever it is that you wish to buy. In the event that you do not need something urgently, simply put aside some money each week or each month. This will slowly amass to the amount that you require. You can then just buy the product outright without any other additional expenditure.

Credit Cards

It goes without saying that credit cards are one of the main reasons for debt in modern times. This does not necessarily mean that you have to give them, however. After all, it is quite difficult to live in this day and age without these cards. You instead have to ensure that you do not go overboard when using your credit card. You should know your limits. You should also only use the card when you know that you will be able to pay back the amount in full at the end of the month. It is those late charges that eventually pull you under.

It may not be easy but it is certainly possible to live without impending debt. You simply have to monitor your spending habits and ensure that you are not spending more than you earn.

“Good debt” is for dumb people

Screen shot 2009-11-18 at Nov 18, 2009, 7.45.23 PM

I was facebook chatting yesterday with one of my loyal readers. She was discussing her car loan, when I mentioned my student loan. She said “At least your student loan is ‘good debt’.” She put good debt in quotes because she knows (and I know) there ain’t no such thing as good debt (did you know ain’t IS a word?).

Typically student loans and mortgages are considered good debt. Why? The thought is, with student loans you obtain a degree, and with a degree you get a higher paying job. For mortgage, you take on a loan, buy a house, and sell the house for a profit. Nice idea right?

Have you read my blog’s title? Is it Punch Bad Debt In The Face? I don’t think so suckers. There is no such thing as good debt. Debt is debt…period. A degree doesn’t guarantee higher income, no more than your home guarantees increasing in value. So don’t fall for the trap and think you should keep Sallie Mae around for the 20 year visit she is planning to take.

It’s time to change the classification of debt. There is bad debt (which we all know as credit cards, payday loans, etc) and not-as-sucky-but-still-pretty-crappy debt (student loans, mortgage). Whoever decided to call some debt “good” was a genius. Heck, I wonder how much money that label has made the banks. Probably at least ten dollars 🙂

Don’t get me wrong. I’m not opposed to utilizing debt to get an education or buy a home. In fact, I’m 99.9% sure I will take out a mortgage. But don’t trick yourself in to thinking that your mortgage is good. It should still be seen as a money hungry beast that won’t go away until you MAKE IT go away. Were you like me and once thought  “good debt” existed? If I could go back in time, I probably would have gone to a public college, saved a ton of money, and graduated debt free. Oh to be young, naive, and easily influenced.

p.s. Anyone that thinks student loans are “good debt” is more than welcome to have mine 🙂