Ten Tips to Avoid Bankruptcy and Protect Your Credit
Having trouble paying your bills? Here are ten tips to help you avoid bankruptcy and protect your credit in tough times.
You've paid your bills on time, every time from the beginning, but you've lost your job, got sick or hurt, got divorced, or simply spent more than you can afford right now. Or, the interest rates on your credit cards has now gone up, or is about to go up, making your debts unaffordable.
You're worried that you may end up in bankruptcy, which means that you legally declare that you are unable to pay your bills and that all of your available assets are distributed to your creditors. Bankruptcy can stay on your credit record for up to 10 years and hurt your credit score too, which makes it harder for you to borrow money in the future and limits your financial options.
The good news is that, depending on your situation, you may be able to avoid bankruptcy and protect your credit by following these ten tips:
1. Talk to your creditors right away.
Believe it or not, your creditors don't want you to go into bankruptcy, because it costs everyone involved a lot of time and money. But you need to talk to your creditors as soon as you think that you may fall behind on your debts. The sooner you talk to your creditors, the sooner you can get help with your debt. The longer you wait, the fewer options you have to stay out of bankruptcy.
2. Don't ignore your creditors.
If you fall behind on your debts, your creditors may call you, email you, or mail you letters. Answer these calls, emails, and letters right away, because they contain information about how your creditors can help with your debt.
3. Work with your creditors.
Your creditors may offer you options to lower your payment or interest rate, consolidate your debt, or temporarily suspend your payments.
4. Get financial counseling.
Financial counseling can help you:
· Make a budget to help you avoid bankruptcy now and prevent bankruptcy in the future.
· Understand your options, legal rights, and responsibilities.
· Choose the best options for your situation.
· Work with your creditors.
· Find programs that offer you legal, financial, or other help.
Ask your creditors about financial counseling.
5. Make a plan for spending and stick to it.
Food, clothing, shelter, and medical care are your most important necessities. Look at ways to cut costs and bring in more money. At the same time, look at which bills need to be paid first and which ones can wait.
6. Take action to protect your credit.
A good credit score means better financial options. Avoiding bankruptcy protects your credit score. The sooner you talk to your creditors, the easier it is to protect your credit.
7. Be very careful about taking on more debt.
When it comes to making your debt situation better, it's important not to make it any worse. Avoid signing up for any more loans or credit cards.
8. Consolidate your debt.
Depending on your financial situation, debt consolidation may be able to help you lower your total debt payments and free up extra money to save for emergencies or pay off other debts. In addition, debt consolidation may also help you organize and streamline your finances with just one payment. For more information about debt consolidation, visit our Debt Consolidation page.
9. Consider selling your assets.
When all else fails, you may need to resort to selling some assets. In some cases, you can use the money you get from selling your assets to pay your debts or pay for basic expenses until your situation improves.
10. Protect yourself.
Make sure to:
· Get any promises or details about help with debt in writing.
· Read everything carefully before you sign it.
· Ask a legal or financial expert to help you understand anything that isn't clear.
· Avoid agreeing to anything you don't understand or that seems too easy to do or too good to be true.
There are ways to avoid bankruptcy when times get tough, but only if you take action right away, work with your creditors, get the right advice, and act on it.
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These are general recommendations not applicable to all financial situations. Every financial situation is unique. Further, the suggestions and recommendations contained within the content provided are not an assurance of any future result. Be sure to discuss your specific financial circumstances with a legal or financial expert before you take action. Contact us for more information.
