There is nothing worse than reaching the end of the month with a bank account in the red. We live in a time of great temptation, of spending more than we really have, without realizing that we are jeopardizing our financial situation.
But what if the problem is not only temporary, what if we have spent all our reserves and do not see a way out? This would mean that you have gone into personal bankruptcy.
Although it is a situation, we all want to avoid, filing for bankruptcy in Quebec through an insolvency trustee may be the most reasonable solution. Thus, a paralegal will take care of your proceedings. This is what the personal bankruptcy laws provide for.
What is personal bankruptcy?
Personal bankruptcy is an unfavorable financial situation in which a person is unable to meet his or her financial obligations. In other words, there are not enough funds to cover basic expenses such as food, transportation, hygiene products, etc.
Another consequence of personal bankruptcy is that you have no resources to pay off debts and the bank is not willing to lend more money. In other words, the debtor is unable to meet his financial commitments and is forced to declare insolvency.
This situation leads the person into a spiral of worry, anxiety and stress. Personal bankruptcy is a very difficult situation, but fortunately there are some ways to avoid it well in advance.
How to avoid personal bankruptcy?
The key to avoiding personal bankruptcy is learning to control personal and family budgets. Here are some tips that will help you avoid falling into this situation:
1. Control your expenses
The first rule to avoid personal bankruptcy is to know and control your expenses. Set a realistic monthly budget and make sure you stick to it. If you have trouble controlling your expenses, consider using some budgeting tools to help you.
For example, digital charts or mobile applications that guide you with respect to money management. These tools will allow you to control your spending, track your progress and help you reach your financial goals.
If you prefer, you can also seek guidance from expert financial advisors.
It is important to have a financial reserve for emergencies. This should be equivalent to at least 6 months of your expenses. This will help you to face any unforeseen event without having to apply for a loan.
Of course, when you are in personal bankruptcy the last thing you need to do is acquire more debt. In addition, it is likely that you will have bad credit for a while and will need to progressively recover and improve your score.
3. Use credit cards with caution.
Credit cards are a very useful tool if used responsibly. But if you are not careful, they can lead to personal bankruptcy and worsen any unbalanced financial situation.
Try to limit your credit card use to paying for essential items. We also recommend that you always pay your monthly balance in full. Leaving balances against you, no matter how small, can have a negative impact in the long run.
4. Invest wisely
If you have enough money, consider investing in stocks, bonds and other financial products. But remember that risk and return go hand in hand. Don’t invest all your savings in one financial product and seek expert advice before making a decision.
5. Sets financial objectives
Sometimes we are tempted to spend a lot of money on unnecessary things just because we think they will make us happy. Setting realistic goals is a good way to avoid this trap.
Prioritize your financial objectives and do not lose sight of your long-term goals. The first objective, of course, will be to reduce the duration of your personal bankruptcy as much as possible.
Subsequently, you can set particular goals according to your ambitions and lifestyle. For example, pay off absolutely all your debts, save specific amounts of money for a specific purpose, etc.