You might try declaring bankruptcy as a way out of getting out of debt, but it’s not quite as easy as that – in the long term at least. Once you declare bankruptcy then your access to credit could immediately be affected, along with the ability to make purchases of any kind. Typically, it’s better to go for prevention first.
Unmanageable credit card debt leads to bankruptcy, so consider the ways to minimize the occurrence of debt by following 10 possible solutions outlined below –
1. Get a clear picture of how much money you have coming in, and how much money you have to pay each month. It is surprising the number of people who don’t think further ahead than their weekly paycheck and forget that once a month there is a power bill to pay. When you know what you have to pay every month, you know whether or not your income is enough to cover it.
2. Keep an eye on your credit score. If it drops and you need money, you might not get it.
3. If you have not yet reached the stage of declaring of bankruptcy, try stockpiling some of your income now. By doing this you are providing a buffer – just in case you get ill or have an accident, you then have some money in reserve which will help to prevent debts piling up while you recover.
4. Debt becomes much worse if you get behind with repayments because most creditors will hit you with a surcharge the day after the due date. You may be able to help yourself if you call any of your creditors and tell them to expect a late payment. It’s especially important to call your creditors even before the time of your first late payment. Communicating early may stop the late repayment fee.
5. Talk to your creditors. Creditors may seem like your worst enemy, especially if your debt has become so severe that declaring bankruptcy is seen as the only way out. But if you file for bankruptcy, your creditors will most likely lose some of the money they lent you. Renegotiating terms can be a better solution for them and you, especially if the interest rate is lowered and a new repayment scheme negotiated.
6. Credit card debt attracts particularly high interest rates partly because there is no capital to back it. One way of trying to eliminate some of this high interest debt is by refinancing your home and getting your hands on some cash. With this you can pay off your credit card debt. Because a mortgage is considered to be secured debt, it attracts a far lower interest rate than the majority of credit cards. By this refinancing, you can make use of secured debt at a low rate of interest to pay off your high interest debt that is unsecured. Keep your credit card paid off.
7. If credit card debt is plaguing you so much that you don’t know which card to pay off next, try calling your creditors and asking them to fix the due dates for payment on a date that suits you. If payments on all your cards are due on the same date, or a day you pick and you remember it, you could avoid non-payment penalties resulting from getting dates wrong.
8. For the moment, avoid borrowing money to buy luxury items, such as a new car. If your car needs replacing, investigate what you can buy for the cash you have on hand and consider purchasing a secondhand one to avoid hefty repayments later.
9. If you are really having difficulties with credit and debt, stop now, tear up those credit cards and store cards and go back to the old fashioned way of handling money and that is by paying for everything in notes and coins.
10. Maintaining healthy finances can really only be done by living within your means. Living within your means is about spending less than you earn. Hard, but you should start now and you may even avoid the ugliness of bankruptcy. Don’t buy what you don’t need.