Exploring Your Personal Resources
When you go through the professional processes to manage your debt, they will want to see that you’ve done everything in your power to manage it. Because if you intend to go down the bankruptcy route, this should be your last option. Insolvency and bankruptcy are two different terms and don’t mean the same thing, but they are often lumped in as the same thing, but we’ll get to this later. Before you get to this point, and before you speak to professionals, you have to see if you can manage your finances. To do this effectively, you have got to make drastic alterations to get that money in place. A lot of people go through personal resources like family or friends, but it’s not always feasible. And when it comes to going to others, it may not yield the results you want. This means that you’ve got to take it upon yourself to find the appropriate methods. A lot of people go for payday loans and approach lenders, but this doesn’t always result in a satisfactory outcome. Because short-term loans are very good at paying off debt, because of the interest rates, it means there will be a lot more repayment tacked on. This is something you have to consider before applying for a loan. On the other hand, long-term loans have a lower interest rate, but you are repaying the loan over a longer period of time. Both are incredibly effective, it depends on the debt you have in the first place.
Managing Your Debt
It’s about making sure you’ve got the knowledge necessary to tackle the debts you have. There are so many different methods to manage your debt. One of the most popular is the debt snowball method. This is where you pool all your resources to pay the minimum balance off each item of debt except the one with the least amount- you put as much of your finances together to pay off that debt as soon as possible. Once that has been eradicated, you move to the next one up, and so on. This works to serve two things; firstly, you’re actually paying the debt off in a productive manner, but it gives you that purpose and motivation to pay all the other debts off. And this is something that needs noting. A lot of debt issues can be the result of a certain mindset. Either you’re not prepared to repay your debts because you don’t think you ever will, or you’ve had a lax attitude towards and money and credit cards. But this isn’t unusual; so many of us have fallen into that trap, especially as the cost of living is rising.
Changing Your Lifestyle
And if you change your mindset towards money and everything it entails, you can realise that in order to really pay off any form of debt, you’ve got to make drastic alterations to your lifestyle. When you have debt all around you, changing your lifestyle is the one true method to take before you go down the bankruptcy or insolvency route. Changing your lifestyle is one of those major shocks to the system. As it is all about the current habits that you need to break, you can struggle at the very beginning. After all, we are used to a certain way of life based on how much we earn. And this is why, when altering your lifestyle, you look at how much you earn in comparison to how much you spend. We don’t necessarily see how much we spend because of everything being automated. Our payments can automatically come out of our bank accounts, so we don’t need to look at them. But if you start to look at your lifestyle in terms of the money you spend, and make an active effort to curb this spending, you will see how much more money you have spare. That’s not to say you can’t go back to your old ways of living, but if you do manage to break the debt cycle, you may find that the new habits you’ve acquired make for a better way of life anyway. At the very least, you’ve got to try.
Applying For Insolvency
And sometimes, we can work so hard and do everything with the best of intentions, but the debt increases (as does the cost of living) and so we find ourselves in the unenviable position of applying for bankruptcy or insolvency. Insolvency, very simply, is about being unable to pay your debts. Bankruptcy is a legal process for people that are unable to pay their debts at all, and the outcome is that you are absolved from these. In terms of insolvency, it’s a personal financial situation, and this means that there are ways around it through the right resources. You can have a debt agreement that gives you the breathing space to pay as much or as little as possible. And when bankruptcy becomes a last ditch attempt, you can be declared as bankrupt, but you have to remember that this can impact your ability to get credit further down the line. Insolvency is one of those processes that is better to go through first, so you are able to pay off your debts in a manageable way.
Before you get to insolvency, and lastly, bankruptcy, it’s important to make sure you’ve done everything in your power to avoid the legal processes. It can certainly have its impacts on our frame of mind, and this means a lot of digging deep, emotionally and financially. And if we are struggling, at least at the very back of our minds, we know that there is a way out, but you have to remember how this can impact you in other ways. It’s far better for us to have a healthy attitude to money so we can cope with the rising cost of living.