There are alternatives to bankruptcy and they should be carefully considered, especially since thanks to recent legislation, filing bankruptcy is no longer the golden solution to avoid debt. How can you avoid ever reaching the point of bankruptcy in the first place? The secret lies in budgeting and in emergency planning. Attempt to live below your means. A common frugal standard is to set aside 10% of your total monthly income and put it into a savings account. What is the worst-case scenario here? You build wealth instead of saving for unexpected debt.
Budgeting is also an area that needs special attention. Budget your finances, detailing all of your income and expenses by the month and by the year. Calculate your grand totals and see what changes need to be made. When you are overwhelmed by bills, pay first the most important debts related to necessities, mortgage or rent, and payments that have attached collateral, such as vehicles. After paying the most important debts pay the legally obliged debts such as taxes, child support and student loans. Then you can hold off on paying unsecured loans and let the interest build, until you are in a better financial position. Plan, save, strategize and avoid bankruptcy!
