Recently on our legal forum a user asked, “I have filed bankruptcy in the past. I am sorry to say, however, that I seem to have gotten myself in another financial crisis. I don’t want to have to file a second bankruptcy, but I am at a loss as to my next steps. Do you have any advice for me to avoid filing bankruptcy a second time?”
Overview of bankruptcy
Although the shame of filing bankruptcy has dissipated over the last twenty years or so, it’s always a good idea to try to repay your debts if possible. Unfortunately, whether it’s a job loss, divorce, medical crisis, or overspending, it’s not unusual for many debtors to find that repaying their debts is impossible. In these cases, filing bankruptcy may be the best option.
What if you have already filed bankruptcy? You may be able to file bankruptcy a second time if it has been several years since you filed and you meet other qualifications, but you’re right to consider other alternatives to avoid filing a second time. With that in mind, let’s look at several steps you can take right now to avoid bankruptcy.
Steps to avoid a second bankruptcy
- Talk to your creditors and try to renegotiate your debts.
Creditors do not want the hassle and cost of going after you for debt payment. They also don’t want to have to sell the debt for pennies on the dollar to a third-party debt collection agency. And while many debtors try to avoid their problems simply by avoiding creditor calls, sometimes the best way to avoid bankruptcy is to call the creditor and see if they will negotiate some type of repayment plan. Maybe they would be willing to extend the payment period a few months? Maybe they would be willing to charge less interest on the debt? Or maybe, if they believe you are close to filing bankruptcy, they might even be willing to settle the debt for less than you owe.
- Consider selling your assets or getting a second job.
The next step after you have talked to your creditors is to find a way to reduce your debt and increase your discretionary funds. One of the most successful ways to accomplish this is to find assets you can sell. Do you have jewelry you no longer wear? A car that you can do without? Paintings? Anything else of value?
Also, consider getting a second job for a short period of time. Although this can be difficult, just a couple of hundred dollars extra each week can go a long way towards whittling down your credit card bills.
- Consider asking family or friends for a loan to avoid filing a second bankruptcy.
Although no one likes to ask a friend or family member for a loan, sometimes it might be necessary to avoid bankruptcy. If you take this approach make sure to get the loan in writing with the repayment terms for the loan clearly outlined.
- Take a closer look at your budget to avoid filing a second bankruptcy.
If we’re honest with ourselves most of us have extra unnecessary expenses each month. Whether it’s a gym membership, a Starbucks coffee, extra clothing purchases or a Netflix subscription, there’s generally something we can eliminate to generate extra cash flow.
If you do not think you have the expertise to review and scrutinize your budget, talk to a friend or financial expert for help.
Bottom Line: There are no quick fixes, but you can take some steps that might help you avoid filing a second bankruptcy.
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