Bankruptcy is somewhat of a dirty word in the financial world. While bankruptcy has certainly been stigmatized to some degree, it’s fairly common. Just under 770,000 individuals filed for bankruptcy in the U.S. in 2017.
However, just because other people are doing something doesn’t mean you should as well. Bankruptcy is best avoided. This is why exploring all your options before bankruptcy is the right move.
Can You Boost Your Income?
Your income is one of the first places you can try to make changes before deciding bankruptcy is the only option. Making more money can be the catalyst for getting yourself out of debt.
Think about it: Your debt keeps growing because you’re spending more than you’re able to pay back each month. Boosting your cash flow is a clear solution for solving this. Of course, this is easier said than done.
Consider taking on a side job to supplement your income. Then, dedicate all that extra money to paying down your debt. Just 100 dollars per week could reduce your debt by over $5,000 per year. Plus, all that debt will no longer be accumulating interest, which will stop your debt from growing so fast.
Have You Tried Budgeting Apps?
Building a budget is one of the most time-tested ways of beating debt. Knowing the comings and goings of your money will let you stay on top of your finances. But some people, understandably, find the whole concept to be a bit cumbersome.
Fortunately, there has never been a better time to start budgeting than today. Technology now allows for budgeting to be a passive, streamlined process. You can simply download an app to your phone and let it do all the heavy lifting for you. Sync the app with your bank account and it’ll be able to see how much money is coming in and going out each month. Some apps will even be able to give you helpful advice based on your spending patterns.
Have You Talked to Debt Relief Programs?
Bankruptcy isn’t fun. When you go through a Chapter Seven liquidation bankruptcy, your debts are wiped clean. But it comes at a cost. You’re going to have to give up most qualifying assets, such as a car, house, or other things that could help repay your lenders. Plus, it’s going to make it significantly harder for you to borrow money down the line since bankruptcy really hurts your credit. Sometimes it can even affect your job prospects if an employer checks your credit history.
Trying to work with a debt relief program is almost always a better solution than opting for bankruptcy. Companies like Freedom Debt Relief have helped many consumers settle their debts. No matter the debt relief strategy you choose, it’s usually better to give it a try than to suffer the consequences of bankruptcy for years.
What Has Been Your Debt Repayment Strategy?
If the phrase “debt repayment strategy” is foreign to you, that might be a big part of your problem. You need to approach your debt with a plan. Otherwise, it’s just going to keep slipping through your fingers.
The two primary strategies for debt repayment are the avalanche and snowball methods. Both have their advocates and critics. However, either plan can be an effective way to get you out of debt.
With the avalanche, you’re going to put most of your resources into your highest interest rate debt first, while maintaining minimum payments on the rest. This will let you get out of debt faster and pay less in interest. While this makes the most sense from a fiscal standpoint, the snowball method has actually been shown to be a bit more effective.
When you employ the snowball approach, you attack the lowest balance debts right away. The idea here is that those little wins will snowball, and you’ll eventually end up paying off all the money you owe. You can also create your own approach that combines these elements in some way.
Bankruptcy might seem like a way to wipe your hands clean of debt. But it doesn’t really work that way. Filing for bankruptcy follows you for years and can lead to a host of challenges. Finding another method and avoiding bankruptcy will almost always be a better choice.