How to Prevent Bankruptcy From Happening

February 27, 2012 by  Filed under: Bankruptcy 

Many people get out of debt by filing for bankruptcy. It seems to be the most convenient, easy way, but if you can avoid having to go in that direction, it will be better. Consumers should try to stay away from this financial failure as much as possible. In the United States, filing for bankruptcy means you must have mandatory credit counseling, then you have to settle your financial obligations to creditors, and go through financial management education.

The Consequences

Keep in mind that such report of insolvency can ruin your credit rating and make you unable to borrow money from lenders for some time. You will not be qualified to get low-interest loans so your only option would be to get high-interest ones, which will only bury you in more debt. Even if you inform everyone that you are going bankrupt, you may still be sued or evicted from your home.

What should you do?

People go bankrupt when they do not manage their finances properly and when they have bad spending habits. People who spend beyond their means should be on guard. Those who overuse their credit cards are also likely candidates of bankruptcy. The best way to keep yourself from debt is to spend wisely.

Analyze your monthly expenses by making a budget plan and strictly follow and stick to it. If you find out that you are spending more than you are earning, it is time to examine your spending habits. Maybe you go out too often with friends, watch movies regularly, buy more clothes than you need or eat at luxurious bistros. You should cut unnecessary spending and focus on your basic needs first. Make sure you set aside a budget for food and monthly bills (water, electricity, phone, internet, etc.).

Debt Management

If you have outstanding debts, do something now while you still have even a few options left. Settle them one by one. Getting out of debt means you have to go through a change in your lifestyle.

Stop using your credit cards!

People are tempted to use their credit cards because it gives them a false impression that they are not spending. What people usually forget when using credit cards is that it adds up to their already huge accumulation of purchases therefore, increasing their debt.

There are certain things you should avoid while on debt.

1. Vacations
2. Fine dining
3. Expensive recreational activities
4. Shopping sprees
5. Excessive traveling
6. Unnecessary personal services (going to massage spas, beauty clinics, or fitness classes)
7. Magazine subscriptions
8. High speed internet subscription

You may also need to move to a smaller house and sell the big one you are currently living in. An expensive car may also need to be replaced with a cheaper one. These are disheartening options, but you will lose them anyway if you fail to deal with the money that you owe. And come to think of it, a big house is more expensive to maintain, as well as a luxury car, which also comes with costly insurance.

You may also want to contact a debt consolidation expert to help you with your money issues. Having multiple debts can be overwhelming, especially since they have different due dates. You can choose to put all of these debts into one for lower interest and less hassle.

It is also worth it to find ways to increase your income. Perhaps you can apply for a part-time job. Your options are endless. Do not hesitate to seek professional help as no one can help you better than experts can.

For more information about debt consolidation and bankruptcy Canada, visit our website

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