First, let's define some terms: When a person or business declares bankruptcy, it means that the law says they can't or can't pay their debts. When a person has been declared bankrupt by the court, debt collectors are no longer allowed to try to get money from them. The legal system makes sure that the court only declares someone bankrupt if they meet certain requirements, and even then, they still have to pay some bills.
How to get out of going bankrupt.
- Don't freak out! Panic is a common reason why people go broke. If you know you're getting behind, look at your budget and your debts with a clear head. Don't make hasty decisions, and don't think that bankruptcy is your only choice.
Before you go to a professional for help, you might be able to avoid bankruptcy if you can sit down and organise all of your information and make a plan for how to help yourself. One thing that makes you more likely to file for bankruptcy in the long run is panic.
- Talk to a professional. If you have so much debt that you can't make a plan on your own, it's time to get help from a professional. This doesn't mean you have to join a debt management programme, but having a financial advisor set up a simple plan can be very helpful when you feel like you've run out of options. A financial advisor could also help you lower interest rates or late fees, which is something you couldn't do on your own.
- Don't borrow money. For some reason, people tend to try to pay off old debt by getting into more debt. It almost never works, and if you're not careful, it will lead to much bigger problems in the end. Stop fooling yourself into thinking that you can pay off your debts by borrowing money from a friend or family member. Do yourself a favour and keep your debt to yourself. Don't bring it up in front of other people. This will help you reach short-term goals, but it won't help your situation at all in the long run.
- Raise your income. Increasing your income is one of the best ways to help yourself pay off your debts. Even if you don't get a raise that's big enough to pay off all of your debt right away, even a small one can make a big difference in how much you owe. If you can't get a raise at your main job, you might want to think about getting a second job to make up for it. You don't need a high-paying second job. All you need is something to add to your main income so you can start paying off your debts again.
- Don't put one creditor ahead of the others. If you want to pay off one debt at a time, you should slow down a little. Even though it will be helpful to pay off a debt in full and get rid of the interest rate, it is not a good idea to only work on one thing and let the other things get out of hand. If you can pay off both small and big debts at the same time, your debt will go down much faster. This way, you'll pay off the smaller debts as you go, and in the end, you'll only have to pay off the bigger ones.
