5 Tips to Manage Your Finances Before Filing Bankruptcy

Is your business running in losses? You can use these 5 tips to avoid filing for bankruptcy.


Akancha Tripathi

3 years ago | 3 min read

The COVID crisis has disrupted economies across the world. Businesses - big and small - have suffered major losses leading to shutting down many of them.

Several companies and individuals are running out of finances to support themselves through the pandemic, and they are planning to file bankruptcy.

Though there are a few things to consider before you take the drastic decision. When you think the world has come to an end, there may still be light at the end of the tunnel.

Wise thinking and some courage can help you sail through. I have enlisted a few points that might help you reconsider the decision and save your business and reputation.

Why Think Before Filing for Bankruptcy?

Managing your finances is important at all times, and you must make calculated efforts in saving money for the future.

However, unanticipated situations such as the current crisis or other events including unexpected business expenses, sudden job loss, unforeseen medical emergencies may land you into a fix. Lifestyle issues such as un-managed spending and neglected savings add on to the trouble.

Forcing you to consider filing for bankruptcy. Owing to mental strain, you may consider it as the last option. But you must understand it affects your reputation and your self-confidence.

Beyond the psychological damage, claiming bankruptcy does not give you the freedom from repaying your debts. The authorities will try to clear the outstanding by selling your properties and capturing your bank accounts.

Your credit score will plunge and there will be a long-term impact on your credit report. You cannot easily take loans and even if you get a loan, the interest rates will be higher than normal.

Ways You Can Try to Avoid Filing Bankruptcy

It is advisable to reconsider your decision to file insolvency and try to fix the situation. Here are 5 ways to manage your finances before you claim bankruptcy:

1. Talk to your Creditors: You can discuss with your creditors about filing bankruptcy and work out a settlement plan. You can negotiate with them to reduce the rate of interest. You can also ask them to lower the monthly installments for some time to reduce the immediate pressure. Most creditors will consider your request to avoid non-payment.

2. Debt Consolidation: You can opt for debt consolidation instead of claiming bankruptcy. This arrangement allows you to merge all your loans into a single debt from a new lender. The lender pays off all your existing debts and you need to repay the lender at the new rates. If you carefully work out the deal, you may repay the amount over the estimated period.

3. Sell your assets: Upon filing bankruptcy, few of your assets or properties will be sold to settle your debt. Instead of damaging your reputation and then selling off your assets, you may sell off additional assets on your own to raise money. Consider selling off expensive pieces of furniture, cars, electronics, and jewelry to pay off the debts. You will face temporary inconvenience once you sell these, but it will help relieve your mental burden.

4. Cut down expenses: Rework your expenses and reduce unnecessary expenditure to save more money. This is an ongoing process, wherein you must save to pay the debt and then to avoid a similar unpleasant situation. You may have to make major lifestyle changes, but the effort will be worthwhile considering you will repay your debts.

5. Borrow money: You can look up to family and friends to borrow some money from them. It is not the best option but is better than claiming bankruptcy. Work out the amount already available and then ask for help for the remaining amount. You can save your relations with a promise to return the money.

Avoid Claiming Bankruptcy for A Better Tomorrow

Avoid claiming bankruptcy by following one or more of these ways, depending upon your debt. A little planning and help can save you from going out of business.

Even if you have saved yourself from the devastation make sure you opt for the services of financial professionals to get help in managing your funds properly.

The implications of insolvency are long-lasting, so managing your finances better by creating a contingency fund will help you avoid similar hassles in the future.

Always remember ‘Nothing in life is permanent’ and a little patience can help you through the worst of storms.


Created by

Akancha Tripathi

Freelance Content Writer and Copywriter creating brand stories.







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