5 Tips to Help You Get out of Debt before Declaring Bankruptcy

Over the years, you may have encountered or read about someone who could not manage their earnings and spendings, to the point of having to declare bankruptcy. This is often viewed as a reset button, something to apply for when the credit card debts have piled up and the bills become unsurmountable. 

However, there are several matters that you should know before filing for bankruptcy. The first (and most important) to remember is that it is more like a “nuclear” option. Filing for this means you have gone to your last resort, and that will reflect badly on your credit score. So, before resorting to declaring bankruptcy, here are five ways you can try to be in better financial standing.

1. Know your cash flow

If you want to avoid bankruptcy at all costs, you must plan your income and expense flow very meticulously. Before you get your salary or revenue at the end of each month, you should already have a budget, with clearly itemized allocations. Know that overspending can be effectively avoided when you know where your money goes.

2. Settle your debts

The first item on your budget should be settling outstanding debts. Then, your budget can adjust to whatever is left after you pay your debts for the month. Whether these debts are credit card payments or mortgage dues, you must prioritize this so that you don’t incur staggering interest rates or late payment fees in the long run.

3. Add revenue streams

If, after budgeting and settling debts, you still find that you are short for the month, you could add other sources of income. Take on a part-time job, build a source of passive income, or sell some assets. Although material possessions might be hard to part with, you can earn them back when you’re in good standing again.

4. Cut down on expenses

Sometimes an extra job or another income source is out of the question, so you might want to reconfigure your budget and see how dropping some items might solve your cash flow problem. Downsizing your car, skipping on a vacation or two, or freezing spending on small luxuries like going to the spa or buying new gadgets also helps with cutting down your expenses.

5. Talk to your creditors

Some banks have hardship programs that are specifically for people in a difficult financial situation. Ask your local provider if they have one in place. However, before enrolling in a program like this, make sure you read and understand the fine print first. This is because you might end up paying a higher minimum than if you just stuck to your original terms.

Final words

If you’re overwhelmed by the decisions and options you can take, get professional debt helpers to counsel you through your next steps. Before you even need to declare bankruptcy, these professionals will put you under a debt management plan so that you can work long-term on your financial responsibilities. These are trained professionals who will listen to your needs and reach a solution that works for you. 

Seeking professional help when you’re in debt will not only address your immediate concerns, but it will also help you become a more responsible spender in the future. 

If you’re looking for more personal debt relief solutions, get in touch with us today to see how we can help!