Debt can come from many sources. Sometimes, it can be no fault of the debtor, such as when they are hit with a catastrophic illness or job loss.
Others go into debt due to poor management of funds or spending habits. Whatever the source of the debt, bankruptcy exists to provide a way out of crippling debt.
While bankruptcy is used by thousands every year to relieve their debt, it should not become a tool for debt relief, used every couple of years.
Here are some practical suggestions so that bankruptcy doesn’t become a way of life for you.
Open a Savings Account
The median American household has $11,700 in active savings accounts. In Michigan, savings can vary wildly, with over half of the state having less than $1,000 in their savings accounts. Savings accounts are a great tool for covering emergency expenses. A good rule of thumb is to have at least 3 months of savings in your account. Be sure to call around to different banks and credit unions to shop rates.
Also, look into money market accounts. These are similar to traditional savings accounts, but have higher interest rates. The only caveat is that there will also be a higher minimum balance to keep the account from accruing penalties.
Track Your Monthly Expenses
Keep a list of your monthly expenses. List them separately as necessities (housing, food, and utilities) and non-essentials. If you are paying down obligations, include this on the necessities list. This will help you ensure that you do not miss important payments, and will also allow you to more effectively budget for the future.
Know Your Income
Be sure to also track your income. Be sure to include all sources, so you have a clear picture. Subtract your expenses from your income, and place the remainder in the savings account you’ve opened. If you want, use the extra to pay off future debts.
Open a Credit Card Account
While credit cards might scare you after a bankruptcy, if used properly, they can be extremely helpful. Shop around for lower interest rates, and apply. Once approved, you should make small, manageable purchases and pay off the balance every month.
Sometimes, a secured card would be the best bet. These are cards that you “secure” with a cash deposit equal to your credit limit. In the event of non-payment, the cash deposit can be used to pay off the obligation. Pay off the balance every month, and you will eventually build your credit up to be able to obtain an unsecured card.
Whether you have been put into debt by unfortunate circumstances, or you have been spending too much, call The Mitten Law Firm today for a free consultation. We can help you navigate the bankruptcy process.
- Michigan Estate Planning: A Checklist
- Chapter 7 Bankruptcy & Your Business
- Prenuptial Agreements in Michigan
- Michigan Child Custody: Custodial Preference
- Downriver Estate Planning: Wills vs. Estate Plans
- Chapter 7 Bankruptcy & Wage Garnishment
- Downriver Divorce: Questions Your Kids May Ask
- Child Custody in Michigan: 5 Steps to Open Your Case
- The Role of Life Insurance in Estate Planning
- 5 Questions To Decide What To Keep In Bankruptcy