The ongoing pandemic has caused severe economic hardships and financial troubles to working class people. Many of them have opted to file for bankruptcy, but it’s not really a scot-free way out of debt. When a person is placed under bankruptcy, they could lose their driver’s license if they have unpaid fines. Their credit score will take a severe hit, and they won’t be able to avail of loans at standard interest rates for the next ten years. This would further aggravate their financial situation. They won’t have cash and credit access.
In the past months, many people in the state of Florida have found themselves jobless, caused in large part by pandemic lay-offs. This has made a lot of people file for bankruptcy. In Orlando, homeowners can turn to The Local House Buyers and other similar companies when they need to sell their homes and pay off some of their debts.
Here are a few tips on what you should do when you’re almost bankrupt:
- Get A Grip Of Your Finances
The first thing that you have to do when you’re facing a potential bankruptcy is to get a grip of your finances. It’s true that bankruptcy can be caused by highly disruptive life events, such as unexpected medical bills from a life-threatening accident, a critical illness, or when you suddenly find yourself out of a job. But, in many instances, too, bankruptcy is a direct result of spending beyond your means and poor saving habits.
For a person living beyond their means, the warning signs of a potential bankruptcy are a stark reminder that they need to rethink their lifestyle. To do this, you should take a stock of how much you’ve saved, how much money you have coming in on a regular, predictable basis, and what you’re spending on every month. There’s no easy way to do this. You have to get to the bottom line of why you have more debt than income. Getting into bankruptcy will negatively impact your ability to secure credit.
2. Make A Budget And Cut Spending
After you’ve identified how much money you really earn regularly, and how much money you spend every week or every month, and exactly where you spend all that money, then your next step should be to take action. If you don’t have a weekly or monthly budget, or if you have one, but you don’t follow it, then, you should make a budget and start sticking to it.
When you’re already on the verge of bankruptcy, every penny counts, so think of ways to cut your spending. Here are some suggested ways that work:
- Sell your home through sites like www.thelocalhousebuyers.com/ and move to a smaller rental house.
- Sell your car and drive a used or older, less pricey vehicle.
- If you have a recreational vehicle, boat, or motorcycle, sell it and save the money.
- Skip those European or Caribbean vacations as long as you haven’t recovered..
- Give up those all-nighter parties that you throw for friends.
3. Pay Bills On Time
Another seemingly small yet common cause of bankruptcy is failing to pay monthly bills on time. In making your budget and payments, you should prioritize your basic monthly bills and necessities. If you haven’t gone over your monthly bills, you should take a closer look at them and cut out those you don’t really need. You should only keep the basics, which have to do with food, shelter, clothing, and transportation.
Here’s a list of little luxuries that people often justify as necessities, but which are the small trickles that cause bankruptcy:
- Dining out or buying expensive food-to-go
- High-definition cable television
- High-speed Internet
- Liquor and other alcoholic beverages
- Cigarettes and vapes
- Gym memberships
- Golf club memberships
- Scuba diving activities
In many instances, bankruptcy is caused by unpaid bills that piled up after several months. Some don’t have unpaid bills, but they used up their credit cards to pay for their monthly bills, and they ended up having outstanding balances on credit cards, which ballooned for not being paid on time, leading to expensive penalties and interests. That’s the thing with interests on loans and credit cards—they’re going to balloon the longer you don’t pay them because interest is compounded.
4. Keep Your Job Or Look For One
Another crucial thing to watch out for when you’re on the brink of a bankruptcy is your source or streams of income. When your boat is about to sink, your regular income is your only way to stay afloat and survive. If you have a regular paying job, keep it and don’t do anything that might cause you to lose your job, such as getting drunk on depression swings, and having to skip work for days on end. Your job is your only way to meet your basic necessities for now. It’s going to be crucial in mapping your way to get out of your situation.
If you lost your job, which might be the cause of your bankruptcy, or you’ve had no job for quite some time now, which may have been caused by the current pandemic, try to find a steady, regular-paying job. It doesn’t have to be high-paying, but it would be best if you can find something like that. It just has to be enough to pay your basic monthly bills and spend for necessities.
There are usual signs that a person is headed for bankruptcy, such as not being able to pay their bills on time, piled up bills or credit card debts, missed mortgage payments, and getting phone calls from creditors or collection agents. If you’re already going through some of these, it’s time to hit the pause button and try to apply some of the ways to avoid bankruptcy suggested here.