Years of financial mismanagement and expensive emergencies can cause anyone to fall into a spiral of debt. But it’s not good to let the money you owe accumulate further over the years. This can harm your credit, eligibility to take out emergency loans, and overall financial health.

At one point, once you’ve settled into a more comfortable financial situation, it’s a good idea to start clearing out your pile of loans and maxed-out credit cards to prevent the amount you owe from skyrocketing to greater heights due to massive interest rates. 

But here’s the catch.

What if you don’t have much to spare after paying off your obligatory bills? What if your credit score is too low to cheese your way through debt consolidation? Sit tight—we’re here to give you a few suggestions that may just work in your favor! 

Filing Chapter 7 Bankruptcy Pro Se and Getting Filing Fee Waived

Individuals neck-deep in debt often turn to Chapter 7 bankruptcy. It’s their last resort when things take a turn for the worst. For instance, your home may be at risk of foreclosure. Or you might have substantial debt from joblessness or a medical procedure. Imagine these situations on top of an already high pile of unsecured loans. In that case, you may want to consider filing for bankruptcy.

However, it’s important to know that not everyone with a lot of debt automatically qualifies for this provision. You first need to pass a means test. It analyzes your financial position based on your disposable income, expenses, and the types of debt you have incurred. Then, each state calculates eligibility for bankruptcy through different standards. 

Limited Debt Relief

Apart from catering to a limited cohort, Chapter 7 bankruptcy doesn’t remove all debts from your name. It mainly covers unsecured loans. These include student loans, medical bills, credit card debt, and mortgage or vehicle loans. 

You may need to provide financial documentation to strengthen your case. This process ensures that you’re no longer able to make the appropriate repayments to qualify for bankruptcy. These include the proof of losing possession of your car or documents that detail “undue hardship” concerning student loans. On the other hand, court fees, alimonies, child support, and loans processed under the table don’t qualify for Chapter 7 filing. As a result, you can’t get relief from repaying any of these. 

Qualifications for Pro Se Filing   

It’s recommended to work with an attorney to settle complicated cases. But if you’re on a tight budget, it’s also possible to file for bankruptcy pro se—or without the help of a professional. Generally, if you have a simple case, moving forward without an attorney is more than doable. You should be able to file on your own if you: 

• Pass the annual household income portion of the means test.  
• Don’t own any non-dischargeable debts. 
• Don’t have a massive portfolio of assets, such as real estate, cars, and other big-ticket items.
• Have a clean financial record with no history of fraud and other money-related crime. 

Waiving the Filing Fee 

To start, you need to produce all your financial documents and file a petition with the federal court clerk. This process normally costs a fixed amount of $335. But don’t worry: you can get it waived if you qualify for the following requirements: 

• Your income is 150% below the federal poverty level. 
• You can’t afford the fee, even in installments. 

The application form to waive the Chapter 7 filing fee is available on the US Court’s website. If you don’t meet the above qualifications, you may also pay the fee in installments by submitting a dedicated form. 

Family and Friends Loan

You might be in a position wherein you can no longer take formal loans due to an abysmal credit score. But what if you urgently need money to pay off an emergency? In that case, asking friends and family for help may be an option when available. However, borrowing money from loved ones can be a sensitive issue. It’s difficult for the lender to guarantee that the borrower will dutifully make repayments. Likewise, it may also be equally difficult for them to say no to a friend in need.

You can prevent putting you and your loved one in a sticky situation by opting to take a formal loan. You can do so by forming a family or personal loan agreement. Having the terms put on paper and signed by both parties gives you—the borrower—the legal obligation to make repayments according to the terms you signed. 

Apart from ensuring that the agreement is written formally and on paper, you also need to agree on an interest rate and repayment strategy. A debt payoff calculator can help you and your family member or friend calculate an optimal interest rate and repayment plan. These details must be documented on the agreement before signing. 

Secured Loan Against Existing Assets (Vehicle)

Secured loans require you to provide collateral. These are properties that the lender will seize on the occasion that you’re unable to make the required repayments. This option allows lenders to look past your credit score. As a result, they can offer you a more attractive interest rate but at the risk of losing your asset. 

To qualify for this loan, you must first own a vehicle—preferably a passenger car. That’s because most lenders don’t accept RVs, motorcycles, and commercial vehicles as collateral. If you don’t have a fully paid-off car, you can also apply for a secured loan using equity. 

Equity is the percentage of the vehicle you have paid off. For instance, if your car is worth $10,000 and you’ve paid off 60%, the $6,000 equity value can be used as collateral toward a secured loan.

View Your Credit Report and Credit Score For Mistakes

Believe it or not, credit reports aren’t foolproof or completely error-free. Common mistakes include errors with inputting your personal information and payments reported as late or completely missed. That’s why scrutinizing your report and amending the mistakes can make a massive difference in your credit score.

A few months ago, Consumer Reports highlighted that about 34% of bank clients found errors in their credit reports. These spanned account information errors to wrongly reported collections and debt repayments. Your credit score can fall by up to 100 points just by paying off debt late, so it’s important to check every detail in your financial documents and file a complaint with the credit bureau as soon as you notice a mix-up. 

You can reference a debt payoff calculator to help you find inconsistencies in your credit report. For instance, suppose you were meant to pay 2% in interest and dutifully did, but your credit report states otherwise. In that case, you should resolve the issue with a credit bureau immediately. 

Finding Freelance Work that Pays Fast

Securing a financial position comfortable enough to afford regular debt repayments can be as simple as finding an alternative source of income. Freelance work is quick and usually commitment-free. So you can focus on your career while taking advantage of a second pipeline where funds can come in as needed. The best part about freelancing is that you can do them on the spot, and they pay just as fast. Doing odd jobs will allow you to cover lapses in your main paychecks and pay off debt more quickly along the line. 

Upwork is a great website to find creative jobs if you have in-demand skills, from graphic design to copywriting, accounting, and even tutoring. But if you have time for in-person work, Wonolo is another platform where you can find a diverse range of positions. These include delivery, administrative, and warehouse jobs—all on a freelance basis.

How to Rebuild Your Credit

Realistically speaking, you don’t want to be stuck in the “no money, bad credit, tons of debt” loop forever. While breaking away from a cycle of debt is not easy, proactively working toward rebuilding your credit can make a world’s difference in achieving financial freedom. There are a few key strategies that can help you achieve this goal: 

Make friends with your credit report. 

Money management starts with being aware of where you stand, tracking your finances, and disputing errors. Unfortunately, that won’t happen if you don’t read your credit report or completely ignore its significance.

So, if you want to know where your financial lies, then you should find time to make friends with your credit report. If possible, check and review your report on a regular basis to know which aspects of your financial situations should be given more priority in order to rebuild your credit over time. 

Consider credit counseling.

Another way to help you rebuild credit is to undergo credit counseling. It usually involves a one-on-one session with a professional whose duty is to assist you in going over your finances to develop a repayment strategy. It can be a beneficial process, especially if you feel like you’ve exhausted all your options but nothing is working. 

So, if you think you need professional help to improve your financial situation, then look for a trustworthy credit counselor who can guide you throughout the process. 

On the other hand, if you also need someone to help repair your credit aside from a counselor, there are companies out there that offer reliable credit repair services online. They can do a major credit repair work for your situation. If you’re looking for more information, you can visit this website or check other resources platforms online. 

Determine what debt you can pay. 

Paying off 20 different loans at once isn’t always an efficient strategy, as you’ll be stuck with the same debts for a long time. In contrast, a debt snowball allows you to tackle one loan at a time to make significant progress in eliminating some debts from your portfolio. Additionally, losing debts can be beneficial to your credit score. That’s why this process of elimination may be a good solution instead of making little progress across a large roster of debts. 

In that regard, it’s important to make the minimum payment or more for each of your loans. Doing so will prevent you from drowning in additional fees caused by piling interest rates. You can count on a credit card minimum payment calculator to help you make out the numbers and decide which card to pay off first. 

Regularly pay off your balances. 

Sometimes, debt is caused solely by bad spending habits. It helps to prioritize paying off all your loans and credit cards by cutting off as many non-necessities as possible from your everyday spending. So before you swipe your card for $20 cupcakes, know that you may have better use for the money. Like paying off outstanding debt! 

Avoid taking on new debt. 

If you can help it, don’t take on any more new debt until you’ve settled your current obligations. Doing so will prevent you from drowning even deeper in debt that you can’t afford to repay. 

Thus, to help you avoid taking on new debt, consider having a monthly budget to help you track your money and determine whether you have extra money to cover a certain expense. 

In order to successfully set up a budget, you should figure out how much you should put to your savings and how much is left to cover your necessities. By doing this, you’ll know where you need to cut down your expenses, especially the unnecessary ones.

Summing it All Up

Despite being in a position where you’ve incurred a massive amount of debt, bad credit, and have no money, not all hope is lost. You can still take charge of your finances by tackling difficulties one step at a time. For example, small efforts like making smarter lifestyle choices, taking on freelance work for additional income, or proactively building your credit can add up over time.

On another note, taking loans from friends and family or opting for a secured loan can be alternative solutions for emergencies. Finally, and as a last resort, filing for Chapter 7 bankruptcy may be an option if you qualify for the requirements.

Author’s Bio

Michael Petrecca

Michael is the Chief Revenue Officer and co-founder of Prudent Financial Solutions.  Michael’s career in the FinTech space began in 2015 as a Financial Consultant at Strategic Financial Solutions. Michael quickly became a top producer in the organization.  He served as a member of the internal advisory board that helped streamline processes and drive organizational change. He later joined Premium Merchant Funding, an alternative lending firm that specialized in small and medium business financing. Michael served as Managing Director of G&G Funding, where he managed a full sales team and was responsible for driving revenue. Michael graduated from Providence College with a Bachelors of Science in Finance and Accounting.