How to Avoid Personal Bankruptcy?
In times of financial distress, personal bankruptcy is not your only option.
In many cases, it is possible to avoid financial troubles by seeking help before it’s too late. Similar to a health issue, the sooner you consult with a professional, the better the chances of resolving the issue before it becomes too severe.
You can implement the tips below on your own. However, if you need help with any of these steps, do not hesitate to consult a personal finance advisor from Jean Fortin.
Our 7 tips to avoid personal bankruptcy?
- Establish a budget
- Reduce unnecessary expenses
- Measure your debt level
- Prioritize repaying your debts
- Negotiate with your creditors
- Set-up an emergency fund
- Increase your income
Let’s look at each of these solutions to avoid bankruptcy in detail:
1. Establish a Budget
Develop a detailed budget of your income and expenses using this free online tool. It will give you a good overview of your financial situation, help identify any expenses that can be reduced, and tell you if you have a surplus to allocate to debt repayment.
2. Reduce Unnecessary Expenses
Review your spending habits and limit those that are non-essential. This will make funds available to pay off your debts and to build an emergency fund.
3. Measure Your Debt Level
Calculate your debt ratio using this tool. It will indicate where you stand on the debt scale and serve as an excellent warning signal to prevent over-indebtedness.
4. Prioritize Repaying Your Debts
Make a list of all your debts, including interest rates and minimum payments for each. Prioritize those with high-interest rates. Accelerate repayment, while continuing to make minimum payments on your other debts to ensure that you do not tarnish your credit report.
5. Negotiate with Your Creditors
If you are struggling to make payments on debts, do not hesitate to contact your creditors to discuss repayment options. They may surprise you with their willingness to negotiate a lower interest rate, waive late fees, or establish a revised payment plan better suited to your financial capacity.
6. Set-up an Emergency Fund
Establishing an emergency fund can provide financial security and prevent you from resorting to credit in case of loss of income, an urgent repair or unexpected expense. The goal is to set aside the equivalent of three months worth of expenses.
7. Increase Your Income
Try to explore ways to increase your income. Although sometimes easier said than done, generating additional income—without overextending yourself to avoid burnout—can help you repay your debts faster and improve your financial stability.
When in doubt, do not hesitate to seek advice from a personal finance advisor from Jean Fortin. They can answer all your questions, help you budget, better understand your credit report, and measure your debt ratio. And, if needed, they can explore with you the various solutions to resolve your debts once and for all!
Consultation is free, confidential, and without obligation.
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