First, some definitions: Bankruptcy is a legally declared inability or impairment of ability of an individual or organisation to pay their creditors. Bankruptcy is a legal proceeding that prohibits debt collectors to collect from an individual who has been declared bankrupt by the court. The legal system ensures that the court only declares bankrupt individuals who meet certain criteria and even then those individuals still have to pay certain bills.
Tips for getting out of bankruptcy.
1. First, don’t panic! A common cause of bankruptcy is sheer panic. If you know that you are starting to fall behind, take a logical look at your budget and your debts. Don’t jump to any quick conclusions and never assume that bankruptcy is your only option.
If you can sit down and get all of your information organised and form some kind of plan to help yourself before you ever go for professional help, you may be saving yourself from bankruptcy right there. Panic is one thing that will make you more likely to file for bankruptcy in the end.
2. Do Get Professional Advice: If your debt has reached a point where you can no longer create a plan for yourself, it is time to seek professional help. This doesn’t necessarily mean that you have to sign up for a debt management program, but getting a simple plan set up by a financial advisor can be extremely helpful when you think you’ve run out of options. An advisor may also be helpful when it comes to lowering interest rates or late fees, which are things you could not accomplish on your own.
3. Do NOT Borrow: For some reason people have a tendency to try paying off old debt by creating new debt. It almost never works, and it will create much larger problems in the end if you’re not careful. If you are under the delusion that you can pay off your debt by borrowing money from a friend or family member, stop right there! Do yourself a favour by keeping your debt in your own hands and son’t bring it to the people around you. This will only accomplish short term goals, and really won’t improve your situation at all.
4. Improve Your Income: One of the best ways to help yourself is to increase your income to keep up with your debts. While it may not be possible to get a large enough raise to cover all of your debt immediately, even a small increase can make a huge difference in the amount of money you owe. If you can’t manage to get any sort of raise from your primary occupation, you might want to consider getting a second job to help catch up. A second job does not need to be anything high paying, but just something to supplement your primary income enough to start taking charge of your debts again.
5. Don’t Place One Creditor First: If you plan on trying to pay off one debt at a time, slow down just a bit. While it will be helpful to eliminate an entire debt and also the interest rate associated with it, it is not a good idea to focus in only one direction and let the others get out of hand. Your debt will decrease much faster if you can pay off the smaller and larger debts at the same time. This way you will pay off the smaller debts as you go and eventually you will be left only paying the larger debts.