No one ever wants to be in a position where they have to consider filing for bankruptcy, and most do so only as a measure of last resort. However, according to the U.S. Courts, those who file for bankruptcy have a 1 in 3 chance of filing again.
Though bankruptcy may be your best option for debt relief it’s safe to say that no one wants to wind up in the same position having to consider bankruptcy because they are facing seemingly insurmountable debts and creditor harassment. Fortunately, there are many things you can do to reduce the likelihood of filing for bankruptcy for a second time. Here are a few ideas for how you can prevent future bankruptcies:
Set a Realistic Budget
It is important to have a realistic sense of your finances in order to avoid taking on debts that may lead to your needing to file bankruptcy. Make a list of all your expenses — not just the ones you hope to limit yourself to, such as rent and utilities. If you know you won’t be able to stop eating out or going to the movies, make sure you budget a line item for these things and then limit the number of outings you have to save.
When calculating your budget, also be sure you have realistic expectations about your income. Set your budget based on your current income — not what you hope to be making after an expected promotion or bonus (which may never come).
Create an Emergency Savings Fund
The unexpected can happen, and it’s usually what leads to situations that cause you to consider bankruptcy. Many people have lost their jobs in this economy — jobs they have held for years. Others have been sidelined by unexpected medical bills after an illness or injury. Some face having to start over after a divorce.
While you can’t prepare for every possibility, you can create an emergency savings fund that will provide a cushion when the unexpected happens. Aim to save enough to cover at least six months of your salary.
Be Cautious with Credit
Many people who file for bankruptcy have high credit card debts. Sometimes the credit card debt is the cause of the financial struggle that led to filing bankruptcy. Sometimes, other overwhelming financial circumstances have led to the need to use credit in order to cover basic living expenses.
Once you start to accumulate a lot of credit card debt, it can be difficult to pay it off as high interest rates compound the debt. Reserve credit card use for emergencies only or limit their use to purchases for which you have the cash ready to pay off at the end of the month.
Get Good Insurance
A major illness or injury is one of the common reasons that people find themselves in over their heads in debt and considering bankruptcy. While you can never protect yourself against all possibilities, you can reduce your risks by getting a good insurance policy that will pay your medical expenses if you are injured or become ill.
Insurance won’t protect you against all losses. Depending on circumstances and your policy, you may not be covered for lost wages, long-term disability, or even all of your medical care. However, having a good insurance policy will minimize your losses and protect you from dire financial circumstances.
The unexpected happens, and bad things happen to good people. You can’t insure that you won’t ever have to face overwhelming debts. However, you can take steps to minimize your risks so that if you’ve already had to file for bankruptcy, you can reduce your chances that you will have to file again.
Of course, if you are unsure about your options, you can always call a North Carolina bankruptcy lawyer at the Law Offices of James Scott Farrin to review your case and get tailored legal advice. Call 1-866-900-7078 right now for a free evaluation of your case!