4 Key Ways To Take Control Of One’s Finances In Order To Avoid Bankruptcy
Bankruptcy is one of the things that most people try to avoid like the plague. A lot of people have included it in the list of the five most life-altering experiences, together with disability, death of a loved one, divorce and serious illness. This is because it can leave very deep personal and financial wounds. Unfortunately, there are times when bankruptcy seems like the only choice for a person who wants to regain their financial footing. However, it is always better to find ways of avoiding bankruptcy in the first place. The following are some of the steps that a person can take in order to reduce their chances of filing for bankruptcy:
Make some financial sacrifices
One of the first ways to regain financial footing when debts start closing in is to make some financial sacrifices. This involves distinguishing between the ‘need-to-have’ and the ‘nice-to-have’. A person has to get their financial priorities in order, and to leave within their means. They have to stop taking debts and credit, and work towards cutting back in order to start repaying their debts. Some of the expenses that a lot of people can get rid of, even temporarily, include gym membership, cable subscription, eating out, or going for movies.
Selling or trading off property
A person who is headed for financial trouble can try selling or trading off some of their property. If they drive an expensive fuel-guzzling car, they can sell it and purchase a cheaper one that will not cost them as much. If they are renting a very expensive apartment, they can move to a cheaper one within the same area. If they have more than one car, they can sell the others and remain with the one that they use often. The money from all of these sales can be used to pay other loans, such as medical debt, secured loans and credit card debt.
Debt negotiation and consolidation
When a person is deep in debt, creditors usually seem like the enemy. However, this is far from the truth. Creditors are always looking for ways to recoup their losses. Most creditors, especially those who have given out unsecured debt, will prefer if the debt is renegotiated instead of discharged in a bankruptcy filing. This is why all debtors should make an effort to consolidate or renegotiate their debts.
In debt settlement, the debtor negotiates a deal with creditors to reduce their payments for a while, or to reduce their interest rates in order to make it easier for them to pay. If a debtor has a solid debt settlement plan, the lender will not refuse it. They can negotiate with the lender to pay a small amount and to increase it as time goes by. They can also negotiate with the debtor to pay a huge amount upfront, and to pay lesser amounts in future in order to clear off the debt.
Debt consolidation involves an agreement with creditors in which all of the debt is combined into one huge loan. The single loan will have a single and lower interest rates. Therefore, the debtor will only pay for one single loan a month, and they will have an easier time remembering to repay it. They will also be able to pay it off quickly as the interest rates are reduced.
Home refinancing
Individuals who are paying off their mortgage and who have a lot of other debts can consider home refinancing. Since a mortgage is a secured loan, it has much lower interest rates than unsecured loans. Therefore, a person can refinance their home and apply for a loan that has a low interest rate and that they can stretch over a long period of time. They can use the money that they get from this low-interest loan to pay off loans that have higher interests.
Conclusion
When a person’s finances are spiraling out of control, bankruptcy may seem like the only way out. However, this does not have to be the case. Considering the negative implications of bankruptcy, it is important for people to do what they can to avoid it. Canterbury Law Group can help individuals who are in this situation, so that they can gain control of their finances and avoid bankruptcy.
