Posted on: 14 March 2016
If your debts have exceeded your income and you're overwhelmed by the outstanding balances, you may find yourself considering bankruptcy as a way to ease your financial demands. Bankruptcy filing is a serious decision, and one that comes with some long-lasting effects, including a negative effect on your credit score. The good news is that bankruptcy isn't your only option for gaining control of your expenses. If you're looking to avoid bankruptcy, here are a few other things you can do.
Build a Budget
You won't be able to do anything about your current situation until you know exactly how much money you have coming in as compared to what has to go out. The best way to determine this is to draft a comprehensive budget. Write down all of your income sources and how much your take-home pay is from each of those sources. That tells you exactly how much money you have coming in.
Compile a full list of your expenses, too. You'll want to include everything - rent, monthly utilities, subscriptions and all of the outstanding debts that you're struggling with. Then, you can total up all of your expenses and see what the difference is between your earnings and your expenses. You won't be able to consider negotiating any kind of payments without knowing what you actually have to work with.
Look for any unnecessary expenses, like memberships you don't use or coffee purchases that you can skip by making coffee at home.
An account settlement is a process that allows you to clear up an outstanding balance by making a lump sum payment. You can reach out to a creditor and offer to settle the balance as an alternative to bankruptcy court. For example, if you have a $4,000 outstanding balance on an unsecured account, you can reach out to the lender and offer to pay $2,800 up front in exchange for the creditor writing off the remaining balance and listing the account as paid in full.
Pursue a Judgement-Proof Finding
If you're overwhelmed by your debts with no cash to settle the accounts, you may be able to have yourself declared as judgement proof. Typically obtained with the help of a bankruptcy attorney, it is a finding that declares that your debts exceed your income so far that you don't have any cash available to pay those debts. If you're declared judgement proof, creditors cannot obtain any money by taking you to court for the balance owed. Most creditors will simply write off the remaining balance as bad debt.
As you can see, bankruptcy isn't the only option for settling debts or saving your financial situation. With these tips, you can better understand how to proceed without filing for bankruptcy. Talk with a bankruptcy lawyer today for legal support to help you resolve your situation.Share