It’s pretty rare to come across a person who sets out in his or her financial life with the intention of someday declaring bankruptcy. In fact, for a lot of us, the prospect of declaring bankruptcy seems like such a far-off prospect – something that happens to other people, people who don’t have a grasp of how to handle their finances.
But unfortunately, overspending and overcharging can creep up over time, and many people who never thought they’d find themselves in a pile of debt often do. When monthly obligations start to seriously outstrip monthly income, bankruptcy starts looking like an attractive option. After all, it’s a way to wipe the slate clean and start over again, right?
Well, yes, but declaring personal bankruptcy has serious financial consequences that can haunt you for years. For example, in the years immediately following a bankruptcy it’s nearly impossible to get a loan of any kind; even renting an apartment can be a challenge. If you’ve run out of options and have no other choice, then bankruptcy might make sense, but many people who are facing down a mountain of debt don’t try other avenues to resolve it first.
Here are three tips for dealing with serious debt that may help you avoid having to declare bankruptcy:
Stop Charging
Probably the most important thing you can do to get a handle on your indebtedness is to stop the bleeding – now. If your debt is getting to be too much, it’s time to stop charging, right away. Cut up your credit cards and start using cash. This obviously won’t help clear up the debt you’ve already accumulated, but at least it will keep the problem from getting worse.
Contact Your Creditors
After you’ve cut yourself up from your credit cards, it’s time to get in touch with all of your creditors and fess up. Let them know you’re having trouble paying your bills and ask them – point blank – to work with you. Suggest an extension of due dates to get caught up, offer to settle a debt for an amount you can afford, or see if they’re willing to stretch out the term of your loan so that your monthly payments will be lower. There’s no guarantee that all your creditors will agree to any of this, but if you’re persistent it’s likely that you’ll get at least a little help.
Reach Out To Community and Online Resources
After you’ve stopped charging and reached out to your creditors, it’s time to work with some other resources. Many local credit unions and community groups offer free counseling services for people dealing with financial issues, so seek out some personalized advice from these resources. If you prefer to go the online route, check out the information available on this site. Either way, it’s critical to get educated about your finances and make a plan for how to move forward.
Dealing with serious debt may not be a problem you ever thought you’d have to face, but many of us find ourselves in unexpected situations. What’s important is that you exhaust all other options before resorting to bankruptcy – chances are, you can turn your financial situation around before it’s too late.
