Many people drowning in debt think that bankruptcy is their only option. While bankruptcy offers a clean slate, it comes with many strings attached. You can lose many of your assets, it can take many years to rebuild your credit, and some debts aren’t forgivable through bankruptcy such as child support or student loans. Before you file bankruptcy, make sure that you try these five financial solutions first.
Stop Using Credit Cards
You need to stop using money that you do not have. Cut back on your spending, especially credit card spending. It is all too easy to swipe a piece of plastic at a store, but when you use cash, you actually feel like you are spending money and it will help you keep a better hand on your finances.
Negotiate With Creditors
Get in touch with your creditors and set up a new payment plan that you can pay off over time instead of filing for bankruptcy. If the creditors know that they will get their money back (even if it will take time), they probably will be willing to work with you. Some will be willing to negotiate a lower balance if you are willing to pay all of it rather than losing the entire debt during a bankruptcy settlement.
Consolidate Debt
It is possible to take out a debt consolidation loan to have one large debt rather than many small debts. However, you do have to qualify for the loan, and getting a good interest rate can be tricky. You can also take out a home equity loan, although if you don’t pay it off you can be evicted.
Sell Your Property
In some bankruptcy cases, specifically Chapter 7, your property is reviewed and possibly sold or liquidated to pay off your debts. However, if you are looking at filing for bankruptcy, it may be better to sell your belongings yourself, as you might get more for them that way. Determine what you have that you don’t need, be it a second car, an antique, or just items you have around the home that you don’t use anymore.
Borrow Money From Friends or Family
If possible, see if you can borrow money from friends or family to repay your debts. Borrowing money from friends is a great option because they will be unlikely to charge you interest or other fees. Just make sure that you repay the debt so that you don’t ruin your relationship.