How do the consequences of bankruptcy alternatives compare?

Let’s talk about how to avoid bankruptcy and what you can expect to happen in each situation. Some options are more favorable than others, and once you’ve explored all of your options for getting out of debt, bankruptcy may be the best option after all.

1. make more money

This is a no-brainer actually. When looking to get out of debt and avoid bankruptcy, the best thing you can do is make more money. I know, it’s easier said than done, but have you really explored creative and innovative ways to increase your monthly income? Here are some of my suggestions that have helped previous clients:

• Rent a room to generate rental income;

• Get a second job;

• Ask for a raise at your current job;

• Put the children to work and if they are working, STOP PAYING THEIR EXPENSES;

• Host a garage sale or sell items you no longer use on Craigslist;

• Start a side business repairing or reusing items for resale

two. Cut expenses

There are only two sides to the budget book; income and expenses. Another better strategy is to not only increase your income, but also reduce your expenses. Any money left over can be used to pay down debt and avoid bankruptcy. Here are some often overlooked ways to cut costs:

• Transportation: Reduce transportation costs by taking public transportation to work. You would be surprised to notice that your stress will decrease with public transport. If you plan to drive, make sure your car is well maintained and paid for. Maybe you need to downsize and get a cheaper car that is paid off to lower car payments.

• Insurance – Home and auto insurance costs can be reduced by examining the number and type of insurance policies you have. If your car is older, consider dropping any physical damage coverage (comprehensive/collision) and keep liability only. Insurance policy liability limits only need to be enough to protect your assets. So if your car and home have no equity, then you don’t need a high-limit insurance policy. Also, look for insurance.

• Utilities: Turn off lights and air conditioning. Cut the mobile phone bill or cut the landline. Call each company to reduce services that will lower your bills or reduce them altogether.

• Groceries: Take advantage of coupons only when it makes sense to buy your shampoo, soap, toothpaste, dishes, and laundry items with coupons. Paper products are another great household item to buy with a coupon. Cut your grocery bill by planning your weekly meals before you shop and consider other meals that you can use similar ingredients for. Cooking at home can not only save money because it’s cheaper than dining out, but it can also help you live healthier.

The consequences of adjusting the budget by increasing income and reducing expenses is that it is a long-term lifestyle commitment that could take more than five (5) years to pay off all of your debts. Even after you maximize this strategy and apply all of your disposable income to debt, it may not be enough and you may still face bankruptcy. However, I still believe that knowing your numbers is an important step in financial transformation and debt elimination, no matter which direction you take.

3. debt payment

If you are behind on credit card payments, they can be negotiated; sometimes for pennies on the dollar. This may seem like a money-saving strategy, but it can leave your credit score in shambles. First, you’ll need a sizable savings account so that when you settle, you can pay a lump sum to pay off the debt. Be sure to get any settlement in writing and ask them to remove the business line from your credit report. You may not get a credit cleanup, but it doesn’t hurt to ask either. This can be an effective method of debt elimination if you only have one or two debts to work through. Any more than that and a bankruptcy case would be a cheaper, better and faster way to get out of multiple debts at once.

The consequences of debt settlement are that not only will you pay off the debt, but your credit may be negatively affected as a result.