| | | | Simple Ways to Avoid Bankruptcy and Its Many Snares |
By Candice Pardue 
Can You be Debt Free?
Debt is something that haunts the hearts and minds of many families and individuals, however, America is a debt-based society instead of a debt-free society today.
Excessive debt has plagued millions of people thanks to the easily accessible credit cards, personal loans, re-financing, etc. If you're one of the many who are burdened by debt, you might be considering bankruptcy as an option. Keep reading below before making your decision.
Is Bankruptcy the Right Solution?
Bankruptcy appears to be the perfect solution to eliminate debt burdens, but usually hurts more than helps. Although there may be extreme cases where bankruptcy is the only way out, most filings could be avoided by shutting out the voices of persuasion which belong to those who are going to profit from your losses.
Young families are often an easy target. They are easily persuaded to get loans for a home, two vehicles, a boat and whatever else comes along. A danger in the modern-day abundance of higher pay jobs for young adults is that the high income can lead to lightheartedness about debt. Many young married couples feel that as long as they're making the big salaries, going in debt is okay. What they don't realize is that debt must be paid back - even if they lose that high paying job. When one or both of them lose their job for whatever reason, the debt is still there lurking.
Bankruptcy is suddenly considered as an option for these young married couples, and their name and credit is ruined before they reach 25 years of age. It's a sad story that's being told all over the U.S.
According to the American Bankruptcy Institute, bankruptcies reached an all-time high in the year 2003, and there were 1.6 million personal filings recorded. Surely, many of these filings could have been avoided. These individuals will have a difficult time building a good credit rating for years to come.
The economy is suppressed when large numbers of bankruptcies occur. Lenders and company owners are the big losers, and taking losses for money due can severely bruise any business.
Solving the Debt Problem without Bankruptcy
Although there's no simple answer to the debt problem when it goes as far as possible bankruptcy, there are ways to help avoid it.
Here are some tips to help you avoid filing for bankruptcy. At least give them a try before ruining your name and credit.
Making a List of Assets
The first thing you should do is make a list of all of your assets, whether it be big or small. Include everything except your mortgage, car payments and any other larger debts. Do include your bedroom suit and other similar items. Are there any valuable items in your yard, such as a riding lawnmower, portable storage, etc.? Do you have a ball card collection? Do you have an antique item that has great value? Everything you own that has any value is considered an asset when you're taking drastic measures to avoid bankruptcy. Spare nothing!
Total Assets
Next, you're going to figure up a total potential value for the assets you listed. For instance, your bedroom suit might be worth $400 if you advertise it through a local newspaper ad or sell it at a garage sale. If you still owe a debt on your bedroom furniture, then you'll need to calculate the difference between what you owe and a possible selling price.
For every item you listed above, write down any debt still due and the potential sales value of the item. These figures should reveal whether or not you can pay off current debts (or play catch up) with the assets you currently own. You might be pleasantly surprised. Selling only a few of your assets might be enough to avoid filing bankruptcy.
Examine your family's assets with your spouse to determine what you can and cannot do without. The things you must have to live, such as a living room suit, can often be sold and traded for a less expensive outfit. Having nice things will not erase the pains and scars of bankruptcy. It's not worth the price you'll have to pay later, and you shouldn't allow pride to keep you from doing what you must do to protect your name and credit.
Realistic Example:
Your living room suit can be sold for: $500 You still owe for your living room suit: $200 You keep: $300 You purchase: $100 (used living room suit) You have left to pay another debt: $200
Of course, everything is dependent upon selling your living room suit in the first place. This is where you'll have to take risks, but it's worth the try to prevent bankruptcy. Use this example for several others assets and you might be able to conquer your current debts.
Will Eliminating Small Debts Help My Big Problems?
Yes, paying off small debts will enable you to pay more toward larger bills. If you have five small debts per month which total $300 per month in payments, then paying these off would give you an additional $300 per month to pay toward a larger bill, such as a mortgage or car payment. The key is to free up as much money as possible for debt repayment. With too many small debts, your hands are tied, and something must always be neglected. Instead of working with a couple of creditors, you're working with five or six creditors, which is enough stress to drive anyone insane!
Your Car Payments
If you own a vehicle (or two), you have three options:
1. Sell the car to pay off the auto debt, and get a much cheaper vehicle to drive for now.
2. Pay the car's debt with the extra money you "found" by taking care of smaller debts as mentioned earlier.
3. Instead of owning two vehicles, downsize to one vehicle if there's any way possible. If your spouse stays home with the kids, this might be an option. Your spouse could drive you to work each day until you're back on your feet and able to get another vehicle again. Or, if you work near one another, you can drive to work together.
The Step that Counts
Contacting your creditors one by one is a crucial step to avoiding bankruptcy and paying off your debts. You should contact each creditor and let them know that you are attempting to sell your assets in order to pay your debts. Ask if there's any way possible they can defer your payments (delay the due dates for a month or more), reduce your payments, or add a small amount to each future payment to make up for past-due amounts instead of requiring it all up front.
Many creditors would be more than willing to work with you if they know you're making every effort possible to avoid bankruptcy. Let them know that you do not want to file bankruptcy, and are making a final attempt to avoid it. They would much rather you pay them little by little than file, believe me!
Come to a reasonable arrangement with each creditor and stick to it. Keep a checklist of your due payments for each month and make these your absolute top priority! If this means eating beans and noodles for a few months, so what? You're avoiding bankruptcy - and that's the important thing right now.
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