The idea of bankruptcy can be frightening as your financial situation can be plunged into uncertainty if you choose to file. However, the good news is there are some alternatives to consider before reaching that point. The following are such alternatives to bankruptcy and they can definitely assist you in getting your debts under control.
1. Financial counselling
With so many outstanding debts, it can be easily to feel like you’re just throwing money at things and getting nowhere. To avoid this, sometimes all you need is to come up with a plan.
Before contemplating filing for bankruptcy, consider meeting with a financial counsellor. This person can sit down with you and develop a plan regarding how to reduce your debts to be more manageable. One strategy often used is the debt snowball.
This consists of listing debts starting from either the lowest amount owed or highest interest rate with bigger payments going towards the first one and minimum payments going to the rest of the debts. Once this first debt is paid you can then move on to the second one on your list and continue until all are paid off.
2. Debt consolidation
All of your debts have different interest rates and demand that you make minimum monthly payments to them all. While this is necessary to prevent your accounts going into default, it can often mean you get nowhere in actually paying off the balance of the debt.
Debt consolidation consists of bringing all of your debts under one account. This means having one interest rate and one minimum payment which are typically lower than if you had separate debts. Doing so will allow you to better manage your debts and avoid missing a payment.
3. Consumer proposal
When you have debts and you are not paying them, it is typical for the debtors to contact you requesting payments in the form of telephone calls and letters. These occasions can be stressful and frustrating as you begin to fear the consequences of continued non-payment.
Before resorting to bankruptcy, consumer proposals should be considered. This entails a licensed bankruptcy trustee contacting debtors on your behalf offering to pay a portion of the amount owed. If the company accepts, you pay the agreed-upon amount and the matter is considered closed. This means the debt will be fulfilled and the debtor will not be able to contact you anymore.
4. Second job
Due to full-time employment, raising a family, or extracurricular activities you may have little time to earn extra money by seeking a second job. However, if it means that it could be an alternative to filing for bankruptcy, it should be considered.
Getting a second job means working around your full-time job and other obligations and earning some extra money. Your paychecks can then put directly towards the balance of your debt. While your spare time may decrease, working a second job is only a means to an end. Once you get a better handle on your debts or pay them off, you can quit.
You may feel like you are drowning in debt. However, maybe you can afford to pay them off and you just have not realized it yet. To do so, you need to compose a budget.
Making a budget consists of listing your needs, what you earn, and where your money typically goes. After doing this, you can cut back on expenditures that are not considered a necessity and put the money you would spend on them towards your debt. Many people have done this and realized that they do have the money to pay off their debts but instead put it towards other things they can do without. This could be you.