Ways to Avoid Filing Personal Bankruptcy

Sell Assets

Selling your assets is one way to raise the money needed to pay your debts and avoid filing personal bankruptcy. If you can share a vehicle with your spouse or use public transportation to get to work or school, consider selling a vehicle to earn several thousand dollars that can be used to pay down your debts. Clothing, decorative items, jewelry and other items can be sold at flea markets, yard sales, garage sales and consignment shops to earn even more money. While parting with your possessions may seem too difficult to bear, using the money to pay your debt and avoid bankruptcy can help you to save your credit and make it easier for you to make large purchases in the future.

Debt Settlement

Debt settlements can be negotiated with some creditors so that you can settle your accounts without having to pay each debt in full. If you owe a creditor $1,000, you may be able to settle the debt by paying $600. Some creditors even allow you to make several payments on a settlement amount, making it easier to pay the debt and close the account. Do not use debt settlement for debts that are current and in good standing. Only use this technique with accounts that have been sent to a collection agency or charged off by a creditor.

Negotiate Terms

Try to negotiate better payment terms with your creditors so that you can avoid bankruptcy. If the interest rate on your credit card is too high, talk to a company representative about getting the rate reduced. If the minimum monthly payments on a purchase are draining your bank account, see if you can negotiate lower monthly payments. Explain to each creditor that you want to avoid bankruptcy and let them know you are willing to pay your debts if given the opportunity to do so. Ask a representative of each company about any financial hardship programs that may be in place. Negotiating better terms can save you hundreds or even thousands of dollars.

Develop a Budget

In order to avoid bankruptcy, you will have to come up with money to pay your debts. Developing a household budget is a good way to see where you can limit spending and use the extra money to pay down your debts. Write down every one of your monthly expenses, whether it is a necessity (rent, groceries, utility bills) or a luxury (newspaper subscription, cigarettes, salon services). Determine which expenses can be reduced or eliminated. For example, you can read your local newspaper online for free instead of paying for a delivery subscription. You can get your hair cut and colored for greatly reduced rates at a local cosmetology school instead of paying full price at your local salon. Use the money you save to pay down your debts.