Ways to avoid a second Wilmington bankruptcy
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Most Wilmington bankruptcy filers don’t file bankruptcy a second time so long as they get the relief they need the first time around. Chapter 7 offers sweeping debt relief of most unsecured debt and can get you out of a financial mess. Chapter 13 can stop foreclosure and repossession of assets and buys you time to catch up on the past due balances. For those that do file repeat bankruptcies, it tends to be consumers that filed but did not complete Chapter 13 bankruptcy. Whatever chapter you filed, once you get the debt relief you need, it’s important to protect your finances from a future filing. Here’s how.
#1 Live Within Your Means
While most Wilmington bankruptcies aren’t triggered by excess spending, you can set yourself up for failure by adopting a lifestyle that consumes most of what you earn and doesn’t allow room for savings or a buffer for emergencies. Just because you’re approved for a $300k mortgage doesn’t mean that’s what you should buy. Choosing a more modest home gives you breathing room in your budget.
Just because your credit union will give you $40k to buy a car doesn’t mean that’s what you should spend. If you always live at the upper end of the scale of what your income covers, you may never be able to save for the future and may always be one life event away from financial ruin. Losing your job, getting sick, or being in an accident might be enough to tip the scales.
#2 Communicate with Creditors
If you experience trouble with your finances and realize you must pay late or max a card, communicate with your creditors ASAP. If you let them know before things turn bad, they have more options on how to help you. They might be able to move your payment due date, raise your credit limit, or offer you a one-time grace period. You won’t know unless you talk to them.
#3 Don’t Buy What You Don't Need and Sell Off Excess
While Wilmington bankruptcies are rarely caused by people spending money wildly, you can still make bad decisions that contribute to financial hardship. If you can’t afford to pay off an item you charge within a month, you probably should not buy it. When you use your credit cards to buy things you can’t pay off when the bill comes due, you’re essentially taking out a high-interest loan for that item.
Also, if you’ve accumulated lots of stuff that you don’t use and don’t need, selling it off can be wise. You can use the money to pay down debt and get the junk out of your life you don’t need. Simplifying and streamlining your life can protect your finances and make your life easier. From there, think carefully about spending decisions and only buy what you need – save indulging in wants for rare treats.
#4 Save for Emergencies and Retirement
To build a buffer in your life against repeat Wilmington bankruptcy, you need a safety net. This comes in two forms. First, you should be saving for your retirement. If you wait, it might be too late. Second, you need to have an emergency fund of a few thousand dollars to cover major appliance failure, auto repair, or a medical emergency that requires you to pay a deductible (which may be $2-$4k).
#5 Think Long-Term
When making spending decisions, don’t focus on how buying that item or choosing that experience will make you feel right now. Consider how spending that money can impact you long-term. It might be fun to buy a $500 purse, but if your car needs a tune-up or scheduled maintenance, that’s a bad exchange. An upscale vacation over a bargain trip might be fun, but the extra thousands are better in your retirement account.
#6 Plan for Contingencies
No one likes to think about worst case scenarios and negative “what ifs” but you should think about what you will do if things turn bad and your finances hit a snag. Some things to consider are life insurance, whether you have adequate retirement savings, whether your health insurance is adequate, and whether you have enough in your emergency fund.
To help guide your thinking and avoid a repeat Wilmington bankruptcy, consider what you would do, and the effect on your finances if you lost your job and couldn’t find another for a couple of months. What would happen if the transmission on your car went out requiring a $3k repair? What would you do if you had an accident and missed a few weeks of work?
#7 Ask for Help Before It's Too Late
No one likes to acknowledge that their finances are in chaos. It can be embarrassing, depressing and frustrating. But hiding your circumstances can make everything worse. If you’re cash-strapped, continuing to socialize when you can’t afford it can exacerbate things. Being honest with your spouse, family and friends is the better approach so they can help you deal and not make things unintentionally worse.
The first line of defense when things get rough financially is your savings and contingency plans. After that, friends and family might help. If things continue to fall apart, filing a second Wilmington bankruptcy may be better than allowing your finances to implode, whether it’s Chapter 13 to buy time to catch up – or Chapter 7 to unload excess unsecured debt.
To find out more about the benefits of Wilmington bankruptcy, contact the Law Offices of John T. Orcutt today. Call +1-888-234-4190 for a free bankruptcy consultation at one of our convenient locations in Raleigh, Durham, Fayetteville, Wilson, Greensboro, Garner or Wilmington.