Going bankrupt is a nightmare for a business owner. But you must remember that you didn’t get to this overnight. You must have made a wrong decision or saw the signs of impending loss but didn’t act on it. ; Either way, you wouldn’t want to go bankrupt after all the efforts you’ve put into your dream business. Below are suggestions to avoid filing for bankruptcy.
Not an Escape
Before we list the ways to avoid going bankrupt, let’s be clear about one thing: filing for bankruptcy doesn’t mean you’re completely free from your debts. Many of your debts will, indeed, be canceled by the court, but not all of your debts will automatically be settled. After you file for bankruptcy, most of your creditors have to discontinue their payment collection—for now.
A Chapter 11 bankruptcy can halt home foreclosure, repossession of certain properties, or attachment of your wages, but you still have to take care of child support, student loans, and back taxes. Also, don’t forget that you’ll be listed as bankrupt on your credit record for the next 7-10 years. It means that no bank or lending institution will grant you credit — not even credit card companies.
So how do you avoid bankruptcy?
Sell Off Idle Assets
The second you notice that you can’t make payments to your creditors, sell some of your stuff. Start with the things you don’t use. Extra furniture, unused electronics, idle appliances, collectible items, jewelry—anything that’s not indispensable. You can sell these items on eBay or have a yard or garage sale. Don’t wait for unpaid bills or due payments to stack up.
Live Within Your Means
Most American workers were found to live from paycheck to paycheck, having no savings or an emergency fund. That isn’t exclusive to minimum-wage earners; it also applies to 10% of workers who make $100,000 or more. Although many factors are beyond the control of some workers who can barely make ends meet, several Americans go overboard on expenses, such as vacations. Don’t give in to the temptation of using your credit card for instant gratification, or you’ll pay for it later—literally.
Cut Down on Spending
Cut down on unnecessary expenses, or getting into debt for a purchase you could’ve saved for. Use only one credit card and only for emergencies. Sell off your recreational vehicle. Plan and save up for a major vacation, instead of making several unplanned minor vacations. Drive an older, less expensive car that’s not a gas-guzzler. Ditch the gym membership and do body weight exercises at home. Tune out your cable TV subscription and stream your shows instead. Don’t eat out and learn to cook gourmet meals at home. You’ll be surprised how much money you’ll save when you do these things.
Separate Your Business and Personal Expenses
A big mistake that small or large business owners make is to treat the business as their personal piggy-bank. The money you borrow for your business — and through your business — is only for your business, not for your personal needs. To avoid the temptation of combining or mixing the two, don’t use your own credit card for business transactions and don’t use your company credit card for personal purchases. Ask your bank if you qualify for a business line of credit in Salt Lake City, and register for the service.
Avoiding bankruptcy isn’t as hard as you think. When you live within your means, lead a simple life, compartmentalize your expenses, and regularly monetize your unused assets, you’ll have fewer chances of getting bankrupt. ; You don’t have to worry about waking up one day with a cold sweat and broken entrepreneurship dreams.