It is undeniable that the emerging pandemic has had a high and large impact on the families’ finances. At a global level, the financial issue will have consequences in the future, however, we will give you some tips to minimize the impact that this may have on your personal finances.
With the onset of the pandemic, states issued mandatory closures of non-essential business in order to contain the virus, even though several states announced stay-at-home orders. This clearly brought a detriment to the economy and a recession in this whole environment. In many cases, people are considering filing for bankruptcy, but in this article, we’ll introduce you to other options before you make that decision.
The concept of bankruptcy is referred as the legal process through which individuals who do not have the ability to pay their debts are supported by the federal laws of the United States to declare bankruptcy, therefore, obligations with third parties are partially or totally canceled as long as the debtor is not able to generate the amount of money owed.
However, declaring Bankruptcy presents some risks such as the impact on the credit history, duration of the negative effect on the credit report since it can stay on it for up to 10 years, obtaining a mortgage after bankruptcy could be difficult as well, erroneous decision due to ignorance of the norm and the complexity for which individuals should be advised by specialized attorneys.
Therefore, before getting desperate and making the decision to formally declare bankruptcy, the ideal is to look for alternatives that can make the generation of new income viable or, failing that, the optimization and prioritization of current expenses. It is understood that these alternatives will depend on each particular case, in order to adopt what best suits each individual condition.
The first thing that must be done is a very detailed and realistic budget, to be able to effectively determine the free cash flow and face the new scenarios that arise, additionally to identify if income can be obtained under new business alternatives or a second job.
The key is to be clear about the reality of your numbers. When preparing a budget, it is important to write with details the cost of living, such as services, food, transportation and shelter. From the previous analysis, all costs and expenses that are not absolutely necessary, obligations that can be postponed, expenses that result in irrelevant preferences or hobbies, and finally financial movements that cannot be sustained should be eliminated. Thus, this will allow to have a clear detail of obligations and possibilities to achieve a better cash flow and a margin of monetary resources to be paid to creditors.
Financial obligations. The financial obligations with entities with whom you have a loan or debt for different reasons is what represents the most concern, due to late charges and penalties for non-payment, also the constant follow up that these entities do to collect payments through phone calls, messages, etc. This is why renegotiation with banks is an excellent alternative and these entities will always give you an option. A good negotiation and adequate structuring of cash flow, apart from being able to refinance the debts, allows to lower the monthly payments, which obviously improves the cash flow.
In addition to the above, this type of approach and negotiations also allow saving time to invest it in the search of new opportunities or income alternatives. It is important to get ahead and present viable payment scenarios to creditors so they can modify payment terms; it is always feasible to negotiate because creditors many times prefer a new agreement instead of not receiving any payment.
Uproot some assets. When the decision is made to generate the sale of an asset, no matter how painful it may be, it can be very effective and smart decision, since with this, perhaps, the loss of the assets is avoided and it is possible to conserve another asset of greater value or relevance. In many cases, the sale of an asset allows a transitory peace of mind due to cash flow and in turn the conservation and / or payment of the quota of other more useful assets.
Ask for advice. Premier Consumer Credit Counseling is one of the organizations that can provide advice on developing debt repayment plans, as well as offering permanent support from experts who deal with cases like these on a daily basis. Let knowledgeable people advise you so you don’t have to make decisions like filing for bankruptcy.
Look for new income. Evaluate your skills and what is easy for you to do or make that may appeal to other people and may want to acquire, such as crafts, design services, article writing, dance classes, or even dog walking services. Exploring other possibilities may generate additional income to allow you to continue paying your obligations.
Remember that the federal government always maintains relevant information related to each situation, on this particular topic (bankruptcy), the FTC (Federal Trade Commission) details important information for people who are considering filing for bankruptcy. https://www.consumer.ftc.gov/articles/getting-out-debt#Bankruptcy