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Tips to avoid filing bankruptcy

Avoiding bankruptcy has literally become a national crisis, as hundreds of thousands of people face the prospect of losing their homes to exorbitant interest charging Adjustable Rate Mortgages (ARM) and the unemployment rate doesn’t seem to be falling. Bankruptcy is a legal, but last resort to solve personal financial problems. Though filing bankruptcy may look very easy and attractive, it has a drastic impact on your purchasing power. Since the bankruptcy record will remain on your credit record for 10 years, it’ll be near to impossible to get a loan from any financial institution.

Therefore, I have listed some advice on how to avoid filing bankruptcy:

1. Sell all your unwanted assets
By declaring bankruptcy, you stand the chance to lose nearly everything that you own. Therefore, identify items which you really don’t need, and put up a garage sale and sell them off. There’ll be someone out there who is willing to pay something for all those stuff. Move to a smaller house, and sell off all the extra vehicles that you own.

2. Work more
Try putting in some extra hours if you can earn more than the normal hourly rate. If your partner or spouse isn’t currently employed, try to find a job for him/her so that he / she can supplement your income.

Try your hand at a raise or a promotion. You may shudder at the idea, but someday or the other, your boss is bound to find out about your bankruptcy, and they may wonder why you never came to them.

3. Negotiate with your creditors
Write to your creditors, telling them about your situation. Let them know that you have financial problems, and ask them whether they are willing to allow you to pay a small amount every month, or charge a lower rate of interest. Most bank and credit card companies have things called ‘hardship programmes’ designed for customers who get themselves into such a situation, so go ahead and ask them about it.

4. Prepare budgets
Draw up a budget for every month, and try your very best to stick to it. Flush all those credit cards down the toilet. Divide the expenses into ‘needs’ and ‘wants’ and try to avoid, as much as possible, spending money on the wants, just till you get out of your financial difficulties.

5. Make changes to your lifestyle
To really get away from the monster that is bankruptcy, you’ll have to make some major changes to your lifestyle. You may have nearly 200 channels on cable television, but, think about it, how many channels do you actually watch? Perhaps 20-30? Then, try to find out a company which allows you to pay only for the channels that you want

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