The state of the economy pushes a lot of people to file for bankruptcy. In fact, US statistics showed that more than 1.4 million people filed for bankruptcy in 2011. Although this number fell by 11.5% in comparison to the almost 1.6 million people who went bankrupt in 2010, the numbers are enough to make business owners and individuals look up various ways to avoid bankruptcy.
What is bankruptcy?
First of all, what does it mean if a person is bankrupt?
Simply put, bankruptcy is the term used for a financial state wherein you are no longer able to pay for your debts (given that you have exhausted all your resources and funds).
Some people would actually think that it is a good thing. If the court declares you as bankrupt, all your debts will be wiped clean and you would no longer have to pay for them. But what happens next is it would hurt your credit score so bad you would not be able to get a loan for seven to ten years.
Given the economic lifestyle of the majority of the population in the United States, having good credit is very important. So bankruptcy, in a lot of cases, may do more harm than good.
How do you avoid being bankrupt? There are many methods that you can do to prevent this situation, such as debt agreement, debt consultation, and even financial planning. The three easiest ways are discussed below:
- Debt awareness
The initial stage of bankruptcy prevention comes from knowing all the debts you have. Determine how much every debt should cost, sort them by category (for example, separate the house and education loans from car and other personal loans), and then analyze how to get through them.
- Cost cutting
Once you know how much you owe, the next step should be easy to follow. This is perhaps the easiest or hardest stage, depending on your mindset, since it requires self-discipline.
Do a self-evaluation and find out the things where you normally spend money that can be instead used for more important things. For instance, it wouldn’t hurt to eat dinner at a fast food diner instead of fine dining in a five-star restaurant. Better yet, you can even learn to cook and/or make your own meals at home. Your ego may be hurt more than once, but hey, it is a whole lot better than being bankrupt.
- Debt consolidation
Sometimes called debt agreement, debt consolidation is a service commonly offered by credit card companies to “gather” all of your debts and turn it into one large debt. So instead of paying different people, you only pay one. Of course, do your homework first and know all there is to know about debt consolidation before availing of it.
There are many other ways to avoid bankruptcy through Personal Loans. But it is important to keep in mind that all the methods above are used to prevent it. Like the old saying “prevention is better than cure,” take utmost importance in planning ahead and thinking it all through so that you stay clear from filing for bankruptcy. The key here is to be proactive.
- About the Author
Thirdy Rosales is doing marketing consultation for Debtconsolidation.com.au. This financial institution provides assistance to some personal monetary issues such as dealing with bad credit loans, providing debt consolidation loans and handling bankruptcy issues.
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