If you are on the brink of a bankruptcy filing, it is very likely that creditors are calling you day and night to collect your debts. These harassing phone calls may be put to good use. Most people choose to ignore the calls or hang up on the collector. Instead of ignoring the situation, use the calls to your advantage. Ask the collectors for a settlement on your debt. For example, offer to pay $2,000 for a $5,000 debt. Keep trying until you are successful. Debt collectors are often will to settle for cents on the dollar.
Earn Extra Income
Earning extra income is one of the best ways to avoid bankruptcy, although it sounds easier said than done. Look for a second job if you are already employed. Seek freelance work if applicable to your field of expertise. Use the extra income earned to pay off your creditors with settlements and payments over time. You may even wish to do odd jobs such as cleaning a neighbor's house or pruning their yard.
If you do not have the time to take on more work, sell some of your property. Conduct a yard sale to earn cash from items that you can live without. Depending upon how strongly you feel about avoiding bankruptcy, you must be willing to sell items that may be of importance or use to you. Again, use the money earned to pay off your creditors.
A budget is just as critical to avoiding bankruptcy as earning extra money. Make sure to account not only for your monthly expenses, but for semi-annual expenses, such as insurance premiums and holiday expenses. Within your budget you should also create a category for paying down your debt. For example, you might set aside $500 each month to pay down your credit card debt. Once you create the budget, follow it. It is critical that those that live with you are on board with your budget. Have a meeting with your family or partner to discuss the budget. The budget will act as your timeline to freedom from debt.
Borrowing money should be your last resort if you want to avoid bankruptcy. This is because borrowing money only adds to your debt load. Borrow from friends and family that will give you low interest or no interest loans. Use the loaned money to pay down your debt owed to institutional creditors, such as banks and debt collectors. If you are able to borrow enough money to pay down all of your debt, you will likely be able to avoid bankruptcy and only be indebted to your friends and family.
Another option to avoid bankruptcy is debt consolidation. This may come in the form of a credit card balance transfer or a consolidation loan from a bank. Debt consolidation permits you to move all of your debt to one institution, often at a lowered interest rate. This also has the added benefit of making one payment a month, instead of many payments to different creditors. However, you must be wary of consolidation and loan fees that may unnecessarily balloon your debt. Although consolidating debt does not reduce your current debt, it serves an important function in creating a convenient and easy way to pay down your debt.
Hire an Attorney
As each financial situation is unique, consulting with an attorney regarding your debts may be very beneficial. For example, if most of your debt is the result of lawsuits, an attorney may be able to successfully resolve the lawsuits. Alternatively, hiring an attorney experienced in business law would be helpful if most of your debt results from the operation of a business. Hiring attorney, however, does have the negative of draining your income. Nevertheless, an attorney may be able to provide you a cost-effective solution, allowing you to avoid bankruptcy.