In the modern world, the supply of goods and services on the market exceeds the ability of consumers to pay. Because of it, debts become more common. They accumulate and, over time, begin to have a significant impact on the quality of your life. It’s important to recognize a problem and take action. In this article, you’ll learn the key steps you need to take and how Chapter 13 Bankruptcy Illinois can help you out of a crisis.
1. Determine Costs
The very first step on the path to getting rid of debts is to determine where you spend your money. You should identify all major expenses and categorize them. There are those costs that cannot be eliminated, such as rent, healthcare, utilities, etc. And some are optional, such as going to the cinema or buying coffee to go. The latter are subject to revision in the first place.
2. Make a Budget
Financial specialists recommend drawing up a personal or family budget in any situation. However, if you are unable to meet financial obligations, it is a mandatory step. Find out how much you can spend on essential items and what habits you should give up. Professionals recommend allocating about 25-35% of income for housing, no more than 15% for transportation, and an average of 10-15% for food. Of course, in a difficult financial situation, you should downsize your lifestyle and, for example, do not buy gourmet or high-end products.
3. Find Sources of Extra Income
It can be challenging to fit additional activities into your established timetable. However, it is worth trying a little during a crisis, and instead of, for example, going to the gym, you can do something that can bring a little money. You can work overtime, ask to add an extra shift to your schedule, monetize a hobby, and get your partner involved. Some jobs do not require you to have special professional skills.
4. Choose a Strategy
There are many different techniques that aim to optimize your debt repayments. Among the most effective ones is the Avalanche method. If you have more than one debt, choose the smallest one and pay as much as possible to get rid of it faster. For other obligations, you make minimum contributions. When one small problem is solved, you move on to the bigger one. If you have the financial means, you can simply make more payments on each debt than is required.
5. Contact Experts
If you cannot find a way out of this situation on your own, seek professional help. Depending on your financial situation, specialists may advise you on:
- debt consolidation: combining debts to reduce the interest rate;
- debt settlement: by agreement with creditors, your debt might be reduced;
- debt management: revision of your payment plan;
The last option is suitable if you are unable to make regular payments. Bankruptcy can be filed under Chapter 7 (total discharge of obligations) and Chapter 13 (debt reorganization with retention of property).
Don’t Postpone Problem Solving
Timely recognition of a problem is the key to its successful solution. Once you realize you can’t handle the financial burden, reevaluate your budget, cut costs, and contact experienced lawyers to help you find a way out.