subject: How To Avoid Bankruptcy [print this page] Do you find bankruptcy as the only option left for you? If yes, then please go through this entire article and see if your opinion changes or not. During bankruptcy the debtor is given a fresh start from all his mounting debt burdens. He can reorganize his debts or can get rid of his debts either by making a long time repayment plan or by selling his non exempt properties. However bankruptcy has its negative effects as well. Here are a few reasons why you should try to avoid bankruptcy as much as possible and look for other alternatives.
Reasons to avoid filing bankruptcy:-
- Both chapter 7 and chapter 13 bankruptcy have some negative effects on your credit report. It can potentially lower a good credit score by near about 100 -250 points. A bankruptcy stays on your credit report for almost 10 years and you are not allowed to file for it for another 6 years. As an invariable result it becomes difficult for you to qualify for any new loan in the upcoming 2- 3 years.
- All your debts can not be removed through bankruptcy. If you want to get rid of your bank tax, student loans, child support or divorce alimony, you will be disappointed to know none of these debts can be removed through bankruptcy. For all these you have to apply for an alternative payment plan.
- Chances of losing your property are also there in bankruptcy. Under chapter 7 bankruptcy plan, certain personal assets like your house or car are being sold to repay your debts.
- There are few negative consequences which you have to face after bankruptcy. You may not be allowed to buy or even rent a car or house on your own. It can also have adverse effects on your security clearance report as well.
- You need to check whether your retirement savings are fully protected or not. During chapter 7 bankruptcy your social security or government pension plan can fall into danger.
After reading the above points if you decide not to file for bankruptcy any more then here are a few alternative ideas for you.
Alternatives to avoid bankruptcy:-
1.You can opt for a debt settlement plan if you fail to repay the minimum amount of your debts. In debt settlement program you end up convincing your creditors to settle your total amount of debts to a much reduced amount and extending the duration of the repayment procedure.
Debt consolidation plan can also be regarded as a good alternative of bankruptcy. In debt consolidation scheme you can consolidate your multiple debt payments into a single payment and can pay them with a much reduced monthly interest rate.
2.In debt management credit counseling agency or any other debt management company takes up the whole matter. They start negotiating with the creditors on your behalf and reduce your monthly interest payment. Now you only need to pay to the debt management company. You are able to manage your debts much more comfortably and systematically with debt management system.
3.If you want to avoid bankruptcy without any professionals help you can try a few other options. For example reduce your house rent by shifting to some cheaper place. Stop spending extra bucks for entertainment purpose. Your office may come as a help in this regard. Consult the office authorities regarding your issues with bankruptcy.
There are a few steps which you can follow on the pre bankruptcy stage. Maintain honesty and transparency with your creditors. Whenever you find trouble in paying your debts contact your creditor immediately. Neither the creditor nor the debtor want to fall into the trap of bankruptcy, therefore by being a little proactive you can save the situation for both you and your lender.
