Finance Globe

U.S. financial and economic topics from several finance writers.
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Can You Return From the Brink of Bankruptcy?

The effects of bankruptcy are devastating and long-lasting. So, if you’ve decided to file bankruptcy, chances are the situation is pretty bad. You’ve likely considered all your options, but before you head to attorney’s office to complete the paperwork, consider them all again.

Have you considered debt settlement? Debt settlement has almost as bad a reputation as bankruptcy, but that’s mostly because of the companies who sell debt settlement services, not because of debt settlement itself. In debt settlement, you offer to pay your creditors a percentage of your outstanding balance and they agree to cancel the rest. If you can convince them your situation is dire, they may accept. You will have to come up with the money to settle your debts in a lump-sum payment, but the upside is that you avoid all the financial baggage that comes with filing bankruptcy.

Have you thought about selling your house? Depending on your outstanding mortgage balance and the housing market where you live, you may be able to sell your home and pay off the mortgage balance. A short sale is another option, similar to debt settlement, where you sale the home for less than the mortgage balance and the lender cancels the remaining mortgage. Short sale does damage your credit score, but the stigma isn’t quite so negative as a foreclosure.

A mortgage is often one of the biggest financial expenses. So, if you can find a cheaper place to live, you may free up some money to deal with other debts.

Maybe you could sell the second car. If you’re a two-car family, consider selling one the vehicles. You might get rid of monthly loan payment. If you own the car, you could use the cash to pay off some bills. Downsizing from two cars to one will surely require a major lifestyle adjustment. You may have to commute to work together. Or, one person may have to take public transportation or carpool. If you own a motorcycle, boat, or another type of recreational vehicle, you could sell that too, and use the money for your debt.

Or you could sell everything of value. Look around your home. You might have more “stuff” than you realize. Do you have more than one television in your home? You could sell them. (You could probably even sell them all). What about DVD players or game systems, like a PlayStation or Wii? Do you own any valuable jewelry? What if you sold all your books, DVDs, and CDs for $1 each? Yard sales are a good way to come up with extra cash for your debt and people are always looking for a good deal.

Why not get a second job? Working 40 hours a week is a lot, but you can possibly work more. You can get a part-time job, working another 20-30 hours a week. Think about it: 20 hours a week at $10 an hour is an extra $800 a month that you could use to reduce your debt, or save up for a debt settlement. There are people who work two fulltime jobs. It’s a major sacrifice. You would have less time at home, but you would also have less time to spend money frivolously. Plus, it’s only temporary.

Bankruptcy is a drastic solution and you have to take drastic action if you want to avoid it. A serious sacrifice may be worth it in the end if you can avoid going through bankruptcy. But, if you do everything you can and bankruptcy is inevitable, you at least have peace of mind knowing that you gave it your all.
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Tuesday, 20 August 2019

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