4 Sure Ways to Avoid Going Bankrupt in 2023

by | Jan 31, 2023 | Blog | 0 comments

Do you know that about 288,000 Americans filed chapter 7 personal bankruptcy in 2021? Debt can damage your life in many ways. Think about the shame, fear, and guilt that come with it. If you ask a quality bankruptcy attorney, they’ll tell you that filing for bankruptcy should be the last resort.

While some factors that cause you to fall into debt are outside your control, others are preventable. For instance, you can’t control some circumstances, such as long-term disability, job loss, or medical bills. However, there are several measures you can take to avoid bankruptcy.

How Debts Negatively Affect Your Life

Carrying debt can adversely impact your physical and mental health. If you’ve ever received a phone call from a debt collector, then you know the anxiety that comes with it. If you don’t work to balance your finances, the feelings of being helpless and overwhelmed eventually drain you mentally.

A recent study shows that 2 in 3 adults in the United States say that money is the main cause of stress in their lives. Here are six ways how debts affect your life:

  • Debt-related depression, anxiety, and mental illness
  • Debt-related family and social problems
  • Constant stress eventually takes a physical toll on your overall health
  • Debt denial
  • Mandatory requirement to attend credit counseling and financial management education when you file for bankruptcy
  • Poor credit score

With spiraling gas prices and soaring inflation, you don’t expect the economic situation to get better in 2023. However, there are some steps you can take to avoid debts despite the current economic situation in the US.

Debts affect you negatively financially, emotionally, and even negatively.

How to Avoid Debts in 2023

While sudden unemployment and unexpected medical bills are unavoidable circumstances, some people get into debt due to poor saving and spending habits. At times when living beyond your means is so prevalent, finding yourself in debt can be a timely reminder that a lifestyle change is inevitable in 2023.

Here are four steps you can take to avoid bankruptcy:

Cut Spending and Make a Budget

As you purpose to change, figure out your spending. In other words, how much do you spend each month? Studies show that about 60% of Americans live beyond their means. The best way to ensure you don’t live beyond your means is by making a budget and strictly adhering to it.

With a budget, you ensure you cover only the essential expenses. Also, it helps ensure that you don’t spend more than you earn. Further, it helps you set aside enough savings. More importantly, you can identify disposable income that you can use to pay debts or save.

Getting out of debt requires discipline.

If you aren’t sure how to make a budget, seek help from a financial consultant. Further, you can download a budgeting app and automate the process.

If you can’t sustain your current lifestyle, downsizing is an option. Downsizing can take different forms, including:

  • Skipping a vacation
  • Moving to a smaller house
  • Buying a less expensive car
  • Selling some luxurious assets, such as a recreational vehicle or boat.

Simply put, ensure your spending is within the absolute basics of clothing, food, transportation, and shelter. Do away with some luxuries that you think are necessities, including cable television, alcohol, dining out, and high-speed internet.

Maximize Income

Now that you’ve minimized your overhead, ensure you earn enough money to pay all your living expenses in cash. The best way to maximize your income base is to get a job. You can even take a second job if you already have one. You can even take a third job if necessary.

It takes proactive steps to get out of debt.

Does this sound draconian? Well, you MUST act forcefully, especially if you’re contemplating bankruptcy.

Other ways to maximize your income include:

  • Turning your hobby into a business
  • Asking for a salary raise
  • Utilizing your unique skills in blogging, public speaking, or freelance writing
  • Going back to school and securing a better job
  • Renting a room in your apartment or home
  • Selling some stuff you don’t use

In your quest to earn more, check if you qualify for government help for medical care, food assistance, and mortgage forbearance.

Settle or Consolidate Debts

Have you ever heard about debt consolidation? It’s a situation whereby you pay high-interest debts with a lower-interest loan. This one can be a great tool for avoiding bankruptcy in 2023.

First, check if you qualify for a low-interest loan. If you do, take it and offset your existing high-interest debts. Take this option as a long-term solution and not a temporary fix.

Sometimes, taking this loan can make you feel relieved. In other words, you’re no longer pressured by your inability to pay your debts. If you aren’t careful, you can easily go back on a spending spree.

Talk to an expert to see how you can get out of debt.

Sometimes, debt settlement can be an option. You can use a debt relief company to negotiate better loan repayment terms with your creditors. For instance, the creditor may forgive part of your debt if you agree to pay a portion of it now.

However, consult widely before you settle on debt settlement or debt consolidation. Remember that each has its own pros and cons.

Get Professional Help

When you have trouble managing your finances, getting professional help is a great idea. For instance, you can seek help from a financial wellness coach. An expert can equip you with the skills you need to manage your finances successfully.

A financial expert can help you:

  • Develop financial management skills and money habits for lifelong success
  • Set and ensure you achieve personal financial goals
  • Identify a practical path to financial freedom
  • Develop and strictly adhere to your budget

A financial coach will focus on your strengths, need, and personal financial goals. Simply put, they will evaluate your financial struggles, determine their cause, and help you develop practical steps toward fixing them.

The Final Thought

You can find yourself in debt for many reasons, some of which are beyond your control. However, you can take the above steps to ensure you don’t go bankrupt. It is important to check and get rid of behaviors that make you susceptible to a financial crisis. You can even get a financial coach to help you determine your financial goals and practical tactics you can use to reach them. At Tetonpines Financial, we can help you understand where you are, recommend a reasonable plan, and give you easy-to-use tools to make achieving your goals second nature.