Finding yourself in money troubles is never an easy thing. You could be working 20 hours every day and doing everything in your power to try and avoid the reality of bankruptcy but sometimes it’s just not enough. Or is it? There are many things you can do before filing for bankruptcy and it’s important to know and understand your options before making a decision that could negatively affect you for the next 6 years. Here we take a look at a few things you should be trying before filing for either personal or business bankruptcy.
Recognize Your Problem
The first step to helping yourself overcome the problem is realizing you have one. Once you’ve done this you can put certain processes in place to ensure you don’t fall further into debt. If you or your business is struggling financially then it’s time to either save it or shut it down completely.
Most companies won’t be making huge amounts of profit in the first year or two of operation, but if you’re further down the line, then it might be time to start reviewing your options to mitigate your situation and avoid any heavy outcomes. Reconsidering your financial future is never easy, but you need to ensure the situation doesn’t get any worse. Using a credit card with a high-interest rate is going to plummet you further into debt and as the business owner, you will be responsible.
Keep Business and Personal Separate
A mistake made by a lot of business owners and entrepreneurs is using personal finances to fund and make up their business shortcomings. You need to remember that you and your business are two separate entities and just because you’re the founder doesn’t mean you need to use your savings just to keep it afloat. The money made by the company is what you need to use to grow and maintain the business.
Having yourself on the payroll will ensure you do this. It also helps the other way by making you think about the difference in money and not taking it out of the company for personal gain. If your business is struggling, then making yourself struggle also isn’t going to help any situation. Don’t try and fix things with your own money.
Look at Your Budget
Your budget is there to help you spend wisely and hopefully allow you to not fall into serious debt. If you find yourself or your company in money troubles then the first thing you should be doing is looking at your budget to see if you can save money anywhere. Ensure there’s enough in the budget to cover the essentials like the rent, bills, wages, and any other essential spending that your company relies on and then use the rest to start tackling your debt. Try and make payments over the minimum as this will get you out of debt quicker and allow you to continue with running your business.
In some situations, you might have found yourself falling into debt quickly so reducing certain things is going to help save some money. Look at relocating to a smaller office or workspace and if there’s no other option you can look at your company’s employee bonus & reward schemes. Do so with absolute care and make sure you explain to the employees that it will return and it’s nothing to do with their level of work.
Covid-19 has taught us that most people can do their job from home. If this is the case in your business, then allow people to do so. You could save a hefty chunk of money by not renting an office at all.
Talk to Your Creditors
These companies want their money back at some point. Going bankrupt isn’t something they are going to want because it means your debt is cleared. If you talk to them and are open about your financial situation you might be able to work out a deal that’s beneficial for you both. Maybe a reduced payment scheme every month or a reduced interest rate. If you can get a reduction of both then you’re far more likely to be able to pay off what you owe.
When speaking with them, remember to tell them you want to pay back everything you owe and bankruptcy is the last thing on your mind. You’d prefer to stick to your agreement and pay off everything, even if it means some reduced terms.
There are plenty of ways to avoid bankruptcy if you’re smart about it. The advice would be to use each of these tips in conjunction with each other to try and tackle the problem head-on. It might be a stressful situation right now, but you’ll feel a whole word better once things are starting to fall back into place.