Being in debt is stressful and it can be hard to find your way out of it. You may be considering bankruptcy. Bankruptcy can be a sensible way to get out of debt, but it can also prevent you from borrowing again for the near future. You may want to try budgeting first. Here’s how you can budget your way back out of debt.
Do the Math
The first step toward budgeting your way back from the brink of bankruptcy is finding out how much money you have that you can spend. Before you can start saving, you have to start living within your means. Calculate your basic necessities and compare it to your after-tax income. How much do you have left over to pay off debt? How much more do you need to pay off debt?
Reduce Your Living Expenses
Cutting your living expenses can be the hardest part of getting out of debt. You can trim out luxuries like cable or start shopping at cheaper grocery stores to start. Other ways you can reduce your living expenses is saving on transportation by carpooling or taking public transit to save on gas. You can even trade in your car and stop paying insurance. You can also use the money if you sell to repay your debts.
Downsize or Rent Your Home
You could also consider downsizing your living space, especially if you don’t have children. One way to downsize without giving up your home is renting an apartment while you rent out your home or put it on AirBnB.
Turning your primary residence into an income property can add to your budget while you reduce your expenses. That way you can move back in when you’re out of debt. You may also want to consider downsizing from a house to a condo, especially in real estate markets where your home could be worth a lot.
In some cases, budgeting your way back out of debt just isn’t impossible. If you don’t have the income to pay for your living expenses and increase your debt payments, you may be considered insolvent.
Technical insolvency means that your assets are worth less than your debts. This isn’t uncommon with consumers – the problem only arises when you don’t earn enough income to make debt repayments. That’s when you can file for a bankruptcy or a consumer proposal, or when your creditors can force you into it.
Don’t wait longer than necessary. Talk to bankruptcy trustees, now known as Licensed Insolvency Trustees, such as David Sklar and Associates about your insolvency options. These include both bankruptcy and a consumer proposal. Both are forms of debt relief that include eliminating part of your debt and repaying your creditors part of what you owe. By talking to a bankruptcy trustee like David Sklar and Associates, they can help you determine which one is best for you.
A bankruptcy may involve selling some of your non-exempt assets to repay your creditors. A consumer proposal protects your assets but lasts longer. You repay your creditors through fixed monthly payments for up to five years. Get advice from a trusted bankruptcy trustee like David Sklar and Associates. You can get out of debt, whether it’s through careful budgeting or a bankruptcy or consumer proposal. Get help sooner than later.