Six Things You Can Do Today to Avoid
By Harvey L. Cox
If you're buried under a pile of debt, you may be tempted to file bankruptcy. However, before you do it, consider some alternative options. The following six steps just may be what you need to fend off bankruptcy.
1. List all your monthly expenses, in detail.
Do you have a mortgage or an auto note? If so, what is your interest rate? How much are your monthly payments? What is the outstanding balance on those loans? List them, in full detail.
Next, write down all your necessary monthly expenses. These expenses include things like electricity, telephone, insurance, food, etc. You should know how much you spend each month on all of these items.
After surveying your necessary monthly expenses, take a look at your discretionary monthly expenses. Discretionary expenses are those things that are optional. You don't have to have them. But, you may enjoy them. Representative discretionary expenses include entertainment, eating out, club memberships and any impulse buys you make in a given month.
Lastly, list all of your credit card debts. Get your last monthly statement from each credit card and write down both the outstanding balance and the interest you're paying on that balance.
2. Eliminate all non-essential expenses.
If you followed through on step one, you now have a really good idea where your money goes every month. So, go through the list and eliminate all expenses for things you can do without, at least until you get your finances under control. Consider it as a Cash Diet Plan for your spending habits.
After you've done away with all superfluous expenses, add up the amount you'll save every month with those cuts. You'll probably be surprised at the amount of money you can save every month by just exercising a little more self-control over your spending habits.
You can use the money your saving to pay off your credit card debt. After you've eliminated that debt you can consider adding your enjoyable but unnecessary expenses back into your budget.
3. Make your Cash Diet Plan a household project.
If you have a family, they will obviously be affected by your Cash Diet Plan. So get them involved in the planning. You'll get rid of your debt a lot quicker if you work together on your family spending.
4. Look At cashing in your equity, if any, in assets.
You can refinance your home to take advantage of your equity and thereby lower your monthly payments. You can also use the equity in your home to get a loan and then use the loan to pay off your high interest credit card debts.
If you either don't own a home or don't have sufficient equity to pursue an equity loan, don't forget about other assets you can turn into cash. Think about any antiques or collectables you own. Maybe it's time you seriously considered selling those assets and using the cash to pay off your debts.
Prepare a list of everything you own that you can quickly and easily sell. Go through your garage and your closets. You'll probably find some items of value that you can live without. Have a garage sale to turn those items into cash. You may even be able to sell some of them on eBay or through local consignment shops.
Yes, selling your assets is a drastic step but it may be the only thing that stands between you and bankruptcy court. The key is to begin thinking of as many ways as you possibly can to generate cash to pay down your debts as much as possible.
5. Consider consumer counseling.
There are a number of non-profit consumer credit counseling offices whose only purpose for existing is to teach consumers how to get out of debt and stay out of debt. Search for one in your local yellow pages and make an appointment.
The consumer credit counselor will help you better understand your financial state of affairs. He will also help you draft a budget. The counselor will also help you prepare a debt management program. That program will help you get your credit cards paid off as quickly as possible with as low an interest rate as possible.
Your credit score will likely drop-off a couple of points after you sign up with a consumer credit counseling service. But, it won't be nearly as bad as filing bankruptcy.
6. Take a second job.
You may already believe that you're working too hard. But, if you're in such financial trouble that you're considering bankruptcy, you should look into a part-time second job. You probably won't get one that will pay very much. But, whatever little amount of additional money you can take in to apply to your debt may just be the difference between filing bankruptcy and averting bankruptcy.
Bankruptcy is often considered an easy way out of debt. But, there are adverse results to bankruptcy. And, those consequences can follow you around for 7 to 10 years. Keep that in maind and don't rush into the decision to file bankruptcy. Seek other choices first.
Harvey L. Cox is a licensed attorney, certified mediator and founder of No Legalese Publishing, a self-help legal publishing site. If you want plain
English explanations of the law and your legal rights, visit NoLegalese Publishing