4 Ways To Avoid Bankruptcy
When debts are mounting and your financial picture begins to feel hopeless, it might seem like the only option is to declare bankruptcy. Before taking such a drastic step however, it may be wise to consider alternatives. Here are four possible ways to tackle your debts and improve your finances while avoiding bankruptcy:
One of the best alternatives to bankruptcy is a consumer proposal. Instead of having to pay an insurmountable amount of debt, with a consumer proposal you pay what you can afford while still getting to officially rid yourself of the debts. A consumer proposal includes agreements with each company to whom you owe money, offering to pay a smaller, more manageable percentage of the debt in exchange for the debt being declared settled.
In some cases, the consumer proposal also extends the amount of time you have to pay your debts. The proposal is an official, legally binding document drafted by a bankruptcy expert, making it more effective than simply trying to work out settlement agreements with your creditors all on your own.
Click here for info on filing your consumer proposal.
Get an Extra Job
While working an extra job may not sound appealing, even a very part-time job can help you get your debt under control quickly, potentially helping you to avoid bankruptcy. The financial benefits of extra income can definitely make temporarily giving up some of your nights and weekends worthwhile.
If a second brick and mortar job doesn't sound appealing to you, consider looking for online freelance work that you can do from home on your own schedule. Some skills that easily lend themselves to freelancing include writing, photography, web development, and graphic design. Just be sure to consistently use your extra income for tackling your debt in order to avoid bankruptcy.
Sell Off Assets
Oftentimes in bankruptcy your assets and personal belongings will be sold off against your will. A much better option is to voluntarily downsize and sell anything you don't need, and then use the funds to pay down your debt. By taking this approach, you can simplify your life while also helping yourself to avoid bankruptcy. Make an honest appraisal of your life and look for areas where you could downsize in order to make some extra money. For example, maybe you have two cars but with a little planning could become a one car family.
Moving into a smaller place and selling excess furniture and electronics is another great way to come up with a possibly substantial amount of cash toward your debts quickly. Selling jewelry, designer clothes, and even small kitchen items and books can quickly add up and take a big chunk out of your debt.
Leverage Your Home Loan
If you own your home, you may want to meet with your mortgage broker to discuss the possibility of modifying your mortgage. You may be able to refinance the loan in order to lower your interest rate, thereby lowering your monthly payments. The monthly savings can be applied to paying down your debts more aggressively, which can be a great way to avoid bankruptcy.
If refinancing isn't an option, you should ask about loan modification plans which can sometimes allow you to make lower monthly mortgage payments, either temporarily or in the long-term. If you have equity built up, you might also want to consider taking out a home equity loan or line of credit and using this to pay off some of your other debts.
By implementing one, or a combination, of these solutions, you may be able to avoid bankruptcy while still getting your debt under control. Be sure to meet with a bankruptcy expert or financial planner to discuss your options in detail.