In many cases, the fact that bankruptcy may be looming in one’s future should be fairly obvious. The need to file bankruptcy or consider bankruptcy as an option rarely crops up overnight. If you are financially living on the edge, you may want to take steps to avoid bankruptcy. In most cases, there are various options and alternatives that will allow you to avoid bankruptcy because bankruptcy should really be considered as your option of last resort due to the long term negative effects that it brings to you.
Most people tend to live on credit a lot, and in fact, probably more than they should. It is just so much easier to pull out the plastic to pay for something when you want to buy something. The big danger here is that you could adopt the mindset that you are not really paying for it since you used plastic to pay for it via a credit card. That mindset is very dangerous and could be the start of toppling your financial house of cards.
To add to that danger, people have a tendency to want to keep up with the Joneses as far as a new car, landscaping improvements, home additions, that new hot tub in back, and so many more things. Keeping up with your neighbors, friends, and relatives can lead one to overextending themselves on credit. One of the unfortunate aspects of this is that credit card issuers are pretty happy to increase your credit limit on request, especially if it’s a credit card you’ve had for awhile and your payments to date have been timely. Adding to this problem is the fact that there are literally tens of thousands of credit card issuers in the US, and if you have been making timely payments, chances are better than excellent that you receive new credit card offers in the mail regularly.
This can be very tempting, especially for the student who will soon be graduating or has recently graduated from college. Credit purchases range from the necessities like books and tuition but can quickly change to being pizza and beer. Of course they have every intent to pay off this debt after graduation, but the reality is that all this money over multiple credit cards adds up quickly, especially with interest and late fees, and all of this combined with a virtual mountain of student loan indebtedness can quickly become overwhelming.
To add to this problem, many young people with a load of student debt need to fully understand that federal student loans cannot be discharged via bankruptcy, so filing bankruptcy for people in this situation may not even help their situation.
So how do you avoid bankruptcy? Consumers must learn very early in life to live within their means. This is a hard lesson to learn, especially in this day and age of “instant gratification”. But how “gratified” are you really going to be if it means bankruptcy later on down the road?
Another way to avoid bankruptcy is to consider using a debit card instead of a credit card. In other words, a purchase cannot be made if you do not currently have the funds available in your account. If you must use a credit card, call your credit card company and ask them to LOWER your limit. If you have a $500 limit instead of a $5000 limit on your credit card, you will think twice before you whip out the plastic next time.
Bankruptcy can be avoided but you need to understand what bankruptcy is and be able to see it coming. And you should also understand bankruptcy law, since with the recent changes in the law, it is much more difficult to file bankruptcy than it was in past years.