Can I Get Out of Debt Without Bankruptcy?

Avoiding Bankruptcy with Debt Negotiation and Paying Off Debt

Debt is hard. Chances are, if you’re in debt, it’s because you were already having a hard time keeping up with your bills. You probably borrowed money to stay afloat, and then found yourself making monthly payments on those debts, too. From there, it’s easy to borrow more, and the cycle gets out of hand.

Now you’re trying to stay on top of monthly debt payments and feed yourself at the same time. The phone is ringing, and the collection statements are coming. You know you want out of this loop, but you also know that you don’t want a bankruptcy on your record. What are your options?

Debt Negotiation

With the help of a lawyer, you may be able to reach compromises with your creditors. You can discuss different ways of paying off the debt and avoiding going bankrupt. Here are some ways your lawyer can argue for you.

Interest Reduction

Some creditors may give you the option to change interest rates. Often, they will use a “step-up” system, where the interest will go up every few years. If your interest is renegotiated, you will probably be paying more money on the debt in the long run, but your monthly payment will be lower and more manageable.

Lower Monthly Payments

Again, this option is likely to cost more money overall, but a lawyer may be able to convince your creditors to lower your monthly payments. This will be very helpful if you owe money to several different companies. If your minimum payments can be lowered, it can give you more money on-hand to focus your payments on one debt. After that loan is paid, then you can use that money to go after the next one, and keep going from there.

Paying Off Your Debt

Ultimately, you’re going to have to take steps to start paying down your debt to avoid bankruptcy. Even when you’ve renegotiated the debt, it will need to come out of your pocket. Here are some tips to help you along.

Try to Approach It Stress-Free

You’re already in debt, and you already know the stakes. Worrying about it now will not add a single inch to your height. As you attempt to chop this debt down, try to find ways to ease into it without making yourself miserable. Here are some ideas.

Make It a Project

A project is something that you are actively working on. Of course, you hope to finish it eventually, but you know it takes time and effort. Projects can energize you, and you can find joy in just working on them. Seeing the incremental victories motivates you to keep going. You don’t have to worry about getting it done right now when you look at it as something you are moving towards. When you look at removing your debt as a project, it may relieve some of the anxiety and add some motivation.

Gamify It

To “gamify” something means to make it into a game. Maybe you’re a gamer. Maybe all those great Switch games are part of the reason you’re in debt. If you’re motivated by the fun of winning, try to approach getting out of debt the same way. Find ways to “level up.” Try to increase spending toward your debt every few months. Start with, say, spending $450 a month on your debt. Then, after three months, bump that up to $475. Keep adding levels every quarter, and have fun doing it.

You could create a visual. Fundraisers often use a thermometer to show how close they are to their goal. If you really want to make it a game, come up with a character. Every time you “level up,” you can give your character more armor or a better weapon. If you miss your goal that month, your character takes a hit and loses health.

Build in rewards for yourself. Avoid anything that costs money, which would be counterintuitive to your goal, but every time you reach a new level or a new goal, you get to spend a day doing something you love.

Give Yourself a Cushion

Life happens, and we’re all aware of those times when the car suddenly breaks down or you need to take an emergency trip to the vet. Before you start attacking your debt, make sure that you give yourself an emergency stash. Save around $500 - $1000, and put it in your savings. Don’t touch it. If it sits in your savings long enough, it can even start gaining interest. When it does, leave it alone. That money is for emergencies only. Keep it out of your mind as an option until your car’s front tire pops.

Pay Off the Highest Interest Rate Debts First

Go through the statements on all your debts and figure out which one has the highest interest rate. That one is your first priority. Keep the minimum payments up to date on everything else, but put all your extra money toward the debt with the high interest. Once that one is paid off, start putting all the extra money into the debt with the next highest interest, and so on.

Shop for the Basics

Your main financial goal is to get out of debt, so limit your shopping to groceries, toiletries, and things you need to get by. All of your expendable income should go into paying your creditors. Stop using your credit card, and don’t update your surround sound system. If you know that you’ll need to go out from time to time just to stay level-headed, work that into the budget, and keep the cost low. Go to the cheap bar; don’t spend over $20; and go only a couple times a month. Remember your goal, and remember you’re trying to avoid bankruptcy.

If you’re struggling with debt, talk to us. With years of experience in debt and tax law, we can help you come up with options. Our consultations are free, and we can help you fight to get your life back. Contact us online, or call us at (321) 320-6088.

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