Filing for bankruptcy is something that is undertaken when all other options have run out
. Extreme financial trouble is often what results in debts remaining unclear. If you plan to continue this way, your credit ratings stand to be affected. Soon you may not even be able to get a small loan to help you tide over a bad patch. Filing for bankruptcy in its self is a tremendous step and one that has to be taken after a lot of thought.
Before you actually decide to take the plunge, you should consider a few alternatives. The fact that there are alternatives does not occur to many since filing for bankruptcy is often kept secret till the last minute. Getting the right advice is essential on all your options before you take the final step.
Some of your creditors may have taken you to court over pending settlements. You could consider an out-of-court settlement in such cases. This would mean negotiating with your creditors and opting to pay a lump sum amount that may be a little lower than the whole sum owed. In such cases, the person negotiating should have a sound legal and financial background. Prior experience in such cases would be an added benefit. You have to keep in mind though that the negative effect on your credit ratings cannot be changed in this case.
Another alternative would be to hire debt-counseling services. This would mean that a company would work out your finances and the money you owe. In this situation, professionals will try to consolidate all your debts and bring down your monthly payments. This is often done in the case of multiple credit cards and helps lower interest rates that accumulates. Depending on the way things are worked out, your credit ratings can hit rock bottom before they slowly start working their way up. It depends on the regularity of payment going forward.
If you are trying to consolidate your debts on your own, you can borrow using your home as collateral. Pay off all your creditors and then begin regular payment of this one big loan. The fact that you could lose your home would be threatening enough for you to make your payments on time.
In all these cases, it is important that you seek the professional services of people who are well established in the field. The flip side would be ending up in more trouble than you already are in.