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Three Ways to Reduce Debt and Avoid Bankruptcy

reduce-debt-avoid-bankruptcy.jpgCalifornia has consistently been at the top of the list for states with the highest number of bankruptcies in the country. It was number one in 2011 reporting over 240,000 bankruptcies, according to Debt.org. For the millions of Individuals who face financial problems, there may be an opportunity to avoid bankruptcy.

The following ways listed in by the U.S. News & World Report are commonly suggested by money management firms and resources. Every debt case is unique, so there are instances where these tips won't apply, but it's a good idea to explore all options prior to filing for bankruptcy.

If you're behind on credit card payments, creditors or debt collection agencies may suggest a debt consolidation or debt settlement. A debt consolidation is just like it sounds and involves consolidating all your debt into one monthly payment, typically, at a lower interest rate. A debt settlement involves a payment negotiation with creditors to pay a reduced lump sum payment or creating a reduced payment schedule. The first thing to do is organize and calculate your total debt and the amount you'd be able to pay each month.

Another option is to borrow money from family or friends. While this may not be the most appealing option, it can help with the burden of payments due immediately and help you focus on a budget for the future. Decide a payment plan both for creditors and to the person who loaned you money with open communication. This doesn't have to be a long-term solution, but one to consider in an emergency.

The third way to work on reducing debt is by sacrificing your wants and learn how to separate them from your needs. Reassessing your monthly budget can help you avoid unnecessary expenses. People who are looking to tighten their budget often limit or eliminate spending on:

  • Eating out at restaurants;
  • Gym memberships;
  • Salon treatments; and
  • cable.

Any money management solution takes time and will not correct a financial problem overnight. In some cases, these options may have already been exhausted and bankruptcy is the logical next step. Our law firm will help you through the bankruptcy process and explore the debt relief option that may be most successful for you. If you are considering filing for bankruptcy in California, contact a qualified San Jose bankruptcy attorney today.

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