How Can You Get Out of Debt Without Filing for Bankruptcy?

by Darwin on September 2, 2019

Just under 770,000 people filed for bankruptcy in the U.S. in 2017. While that number makes it clear that bankruptcy isn’t as uncommon as some might believe, it’s still not something you want in your life. Filing for bankruptcy can have negative effects on your life for years. These are some ideas for how you can get out of debt without filing for bankruptcy. 

Stop Using Your Credit Cards

Credit cards are one of the most vicious forms of debt. Even if you don’t put that many expenses on your cards, those balances can quickly balloon to an unsustainable level. This is because credit cards come with some of the highest interest rates of any form of debt. 

Even if you have good credit, you’ll end up paying in the high teens on revolving balances. People with poor credit often will have to pay significantly higher than this. Cutting out credit cards can be a way to minimize the amount of future interest you’ll owe. 

Utilize a Debt Repayment Strategy

A general doesn’t go into battle without a strategy. In the same way, you shouldn’t try to tackle your debt without any kind of plan. There are two popular approaches that get used all the time by people trying to tackle their debt: the Snowball and Avalanche methods. 

It’s unclear why snow happens to be the debt metaphor of choice. But these methods are perfectly encapsulated by these images. The Avalanche has you pay off your debts in order of highest interest rate, while the Snowball encourages you to pay the smallest balances first. 

Some people vouch for the Avalanche because this method will save you the most money, since you’ll incur less interest. However, studies have shown that the Snowball is actually more effective in helping people conquer their debt. This is due to the psychology behind getting small victories right away helps you continue that progress until the debt is gone. 

Work with a Debt Relief Company

Debt relief agencies can be a good place to look when you’re struggling to pay off what you owe without resorting to bankruptcy. However, it’s important you do some preliminary research before you decide to sign up for any services. Not all debt relief agencies are the same, and not all of them have your best interests at heart. 

Check to see what other people are saying about the company online. Many consumers have successfully worked with Freedom Debt Relief for debt settlement, as evidenced by hundreds of reviews. This process involves tucking aside a certain amount each month until you have enough to kick off negotiations with your creditors for a lower settlement.

Enrollees who qualify for the Consolidation Plus program from Freedom Debt Relief even have a chance to settle their debts faster because they can get a debt consolidation loan to do so. This allows enrollees to make a single payment to the debt relief company as opposed to juggling many individual payments to various lenders.

Explore your options for debt settlement and consolidation before defaulting to bankruptcy.

Don’t Buy as Many Things 

Simply changing your spending habits is one of the best ways to help yourself get out of debt before bankruptcy becomes inevitable. You can start by adjusting your budgeting process. Creating and sticking to a firm budget will limit your ability to buy things you don’t really need. 

You can also create rules for when you do want to buy things that aren’t built into your budget. The 24-hour rule is a great example of this. With this, you wait 24 hours before you make any purchase. This can drastically cut down on your impulse spending, and help you stay on track to pay down your debt.   

Boost Income or Sell Items

There’s no denying that generating more income can help you with paying down your debt. When you have more money coming in, you can dedicate more to reducing the amount you owe. You can boost income by getting a second job, freelancing, asking for a raise, or working somewhere else. 

Selling items is also helpful because it can give you immediate funds for paying down your debts. You don’t need to sell everything you own; but think about what things you’re not using enough to justify the cost. It’s also not a bad idea to downgrade to less expensive versions of the same thing. For instance, you can drive a less expensive car and still get from point A to point B. 

Bankruptcy is a scary thing. You only want to take that route as an absolute last resort. Fortunately, there are many ways you can reduce your debt so you don’t end up having to file for bankruptcy. 

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