You are reading Week 12 of 52 Weeks to Eliminate Debt & Curb Spending.  Please read the overview here to learn more about the series & get your FREE financial planner.  If you just joined us, please start with week 1.

One option I mentioned last week when talking about how to avoid bankruptcy, was you may need to know how to negotiate with creditors. As your debt is piling up, you have to find a stopping point at which you can reverse the problem. Sometimes that means sitting down with pen and paper and a telephone to go the old fashioned route of calling the people you owe and figuring out a solution with them.

How To Negotiate With Creditors:

Be brutally honest. When you call a creditor to attempt a negotiation you have to be honest.  No lying to say you might be able to come up with more money next month. Make it very clear where you are currently financially, and that improvement may take time. Tell them what you can do, instead of focusing on what you can’t do.

Being honest with a creditor is what they need.  They need to know what to expect. Don’t promise on something you know you can’t deliver.

Make it a win-win situation.  Being willing to compromise (if your budget allows), can create a better chance for negotiations. Approaching a creditor and working with them to create a new payment amount, lower interest rates or even settle an account for a percentage of what is owed can all be great ways to get out of debt and avoid bankruptcy, foreclosure or repossession.  The creditor gets some money and you

Be prepared with honest numbers. Seriously look at what you can afford to do. If that is only $25 a month, tell your creditor that. Take the time to prep before you call by looking at your account history. Look at the total balance, current and past interest rates, how old the account is, and then look at your finances. While you always want to offer more payment, go with the lower amount you are certain of. You can always pay more than promised.

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You are reading Week 11 of 52 Weeks to Eliminate Debt & Curb Spending.  Please read the overview here to learn more about the series & get your FREE financial planner.  If you just joined us, please start with week 1.

As I talked about last week, there are some instances when it can seem you have no other choice but bankruptcy. This week I am going to share some tips with you on how to avoid bankruptcy. We will look at these suggestions in depth at various points this year, but this week we will focus on the basics.   You want begin considering these options now to get your finances back on track and get out of debt this year.

How To Avoid Bankruptcy

Get honest with your creditors. When you are behind on payments (in default), it’s time to get honest with your creditors. Start calling and talking to them. Tell them you want to avoid bankruptcy.   While a mortgage, car payment and select credit cards might be unwaivering without an attorney of other 3rd party being involved, there are many creditors who are willing to suspend your account and negotiate lower payments for you.

Instead of letting the fees continue to pile up, focus on how you can negotiate a functional payment with them. Ask for an extension, lower payments, lower interest rates, suspend accounts or any negotiation they are willing to offer to keep your account from going to collections or court for repayment.

If you’re account is current, they are less likely to help you by reducing payments or interest rates.  Now, I’m not saying stop paying on accounts, so you can negotiate a deal.  I’m suggesting you focus your efforts on accounts that are already in default & keep paying the minimum payment on accounts that are current.

No amount is too small to offer. Your meager twenty five dollars a month may not seem like an option to offer, but when it comes to creditors no amount is too small to offer. While they will ask for more, and likely you will be charged interest for being late, there is truly no amount too small to offer. Most creditors would rather have you paying something than nothing at all. Taking you to court or sending you to collections costs them money they don’t want to spend. Offer even a small monthly payment.

Seriously change your spending habits. Yes, sometimes you just don’t have the income to make even the basics happen. That is understandable. Yet, some people are struggling because they still haven’t given up their wants to pay for their needs. Take time to really get honest and evaluate your income and expenses to remove things you don’t need. Some things can be a temporary change while others could be a permanent change. The important thing is to get honest about your situation and step up to make the big changes required to avoid bankruptcy.

Sell your possessions.  I know, I know.  We’ve been here before.  If you’ve previously resisted the idea of selling your stuff, now is a good time to reconsider.  Maybe you have an addiction to the jewelry store down the street.  Maybe you got a bit too excited about all those new TV’s and gadgets at Best Buy. Maybe you couldn’t help but purchase a just few more items every time the new Pottery Barn catalog was delivered to your door.

Stop and think about it.  Do you really need a flat screen in every room of your house if you might not even have a house to put them in soon?  Should you really be walking around with flawless diamond earrings and a Tennis bracelet if you might lose your car?  You don’t necessarily have to have super expensive items to sell, any amount of money you can make will help.  I’m just trying to put a little perspective into the situation.

Consider Debt Settlement.  Talk with a reputable financial adviser or credit counselor about the possibility of debt settlement.  Don’t just pick a number of a debt settlement company out of the phone book. They are there to help themselves, not you.  Get a trusted 3rd party involved to help look out for your best interest.  There will be fees, but you won’t take as big of a hit on your credit as with bankruptcy.

Ask for help.  Borrowing money from friends and family is usually not a good idea.  BUT if it’s that or bankruptcy, it could be a good option.  Determine how much money you need borrow to avoid bankruptcy.  Then work out an official repayment plan to start paying back the money you borrowed immediately.  This loan should be added to your monthly budget.  Do not use this as a “get out of jail free card” and continue raking up more debt.

It isn’t easy to avoid bankruptcy once you reach the point of collections, foreclosure and repossession, but it can happen. To avoid bankruptcy you really have to get honest, swallow your pride, ask for help and work hard. Focus on getting rid of debt by first being honest with yourself about what created it and how you can fix it.

Week 11 Challenge:

If you haven’t updated your debt spreadsheet since week 1, you need to do that now. How does your current debt compare to t10 weeks ago?  Have you made any progress or have your debts increased?  Note what accounts are in default and how much money you would need to avoid bankruptcy.  Look over the tips above.  Is there anything you haven’t tried?  Instead of using one of these tips, combine them.  Put all these tips plus anything else you can think of in your arsenal to avoid debt.

Start calling creditors (call one company per day or set aside a day and get it all over with at once), schedule a meeting with an adviser, get items listed on Craigslist and/or call your parents for help.  Do something TODAY, anything to help start the process and avoid bankruptcy.

Disclosure:  I am not a financial adviser nor do I have formal financial training.  All articles are for informational purposes only and should not be interpreted as financial advice or consultation.  Please consult your account and/or financial adviser before making changes to your finances.  All situations are different, so please consult a professional to determine your individual needs.

If you are in debt, at some point you may have asked yourself the question, is bankruptcy ever a good choice?

I hope to be brutally honest this year in our dealings with getting rid of debt. I want to give you quality information and tips on how to get yourself out of debt, but that also includes the nasty B word – bankruptcy.  It’s a tough decision to make – whether you should simply choose bankruptcy to solve your financial problems.

Is Bankruptcy Ever A Good Choice?

While I wish that nobody ever would face the very thought of bankruptcy, it is a reality that must be dealt with. I know someone that filed for bankruptcy.  I was shocked to say the least, but sometimes people feel it’s their best option.

Sometimes when individuals get too far in over their heads, they struggle to find any other reasonable way to pay back their debt without this method. We are going to look at a couple specific things that may mean you should entertain the idea of bankruptcy.

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You are reading Week 8 of 52 Weeks to Eliminate Debt & Curb Spending.  Please read the overview here to learn more about the series & get your FREE financial planner.  If you just joined us, please start with week 1.

We have already talked at length this year about creating a functional family budget. This week we want to look a bit more at making wise budget choices. You have created a budget, but sometimes you need to look a bit closer at what you are allowing into your budget that could be adjusted to pay down debt or to increase your savings account. This is not to condemn your financial choices, but to remind you that sometimes you need to look at the big picture for the most success. Sacrifices now can result in a debt free life later.

Making Wise Budget Choices:

Look beyond immediate benefit to the big picture. As you look again at your budget, you need to look at the big picture and not just immediate gratification.  I know, you REALLY need a night out.  That new iPhone would be awesome.  Don’t look at right now, look at how much better that dinner will taste once you save up and can pay in cash.

Focus on getting caught up, so you are no longer in default on accounts. This should be one of the key focus in your budgeting. Yes you need to account for rent, insurance, food, transportation and savings – but those optional things like a morning coffee or a lunch out with friends should be shelved until you are no longer in default on credit accounts. The longer you stay in default, the larger the fees and your balance will become.

While paying off a small balance this month may be rewarding, it would be better to put that money toward a debt you are in default with instead. Say you are $200 behind on payments to credit card A, but credit card B has a balance of only $200. You want that zero balance, but reality is getting the zero balance on credit card B would actually cost you more in interest and penalties. Look at the big picture and focus on getting caught up, so you are not in default before you focus on paying off debt.

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Whether you are able to already make payments toward debt or are working away at finding new income to pay more toward debt;  you may be ready to downsize. When you chose to make the step to downsize, it may be as simple as selling your old car to a neighborhood teen looking for their first car.  It could be as large as selling your home and putting the equity into a smaller home with lower payments. There are multiple ways to downsize, and I hope to give you some ideas on how to make that happen.

3 Ideas to Make the Step to Downsize:

Sell extra vehicles. Most families have more than one vehicle. While it can be a necessity in some situations,  the second car is often just a waste of garage space.  Carpooling, scheduling errands and using public transportation are all options for most people. If these things are not possible, then selling the vehicle won’t work for you.

However, before you make that ultimate decision – take a good look at your true need versus your wants. Being left with only one vehicle in your household may free up not only extra money from a sale that will pay off debt, but the insurance, maintenance and gas costs that you also have in your budget.

You can also choose to downsize to a cheaper vehicle.  Do you really need that new car?  Could you trade-in your current vehicle and get a pre-owned vehicle for half the monthly cost?

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As difficult as it may be, if you are working to get rid of debt, you must Change The Way You View Money. Our upbringing, peers and life experiences all shape who we are and how we view money. As you look honestly at your current debt, you must also accept that your view of money could be the problem.

1. Accept that your income is not guaranteed. While most of us have a secure job that we feel good about, reality is that no job is guaranteed forever. We have to look at our paycheck as not just income for the moment, but a plan for the future as well. Begin looking at each paycheck as an opportunity to plan for your future as well as pay your current bills. Don’t fall victim to the, “Well, I’ll get paid next week” trap of spending money you don’t have on hand. Remember that not all income is guaranteed to continue.

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