How to Avoid Bankruptcy

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How to Avoid Bankruptcy

Filing for bankruptcy can have serious repercussions. It will not only have a bad
impact on your credit, but it won’t be easy to take advantage of low interest finance
loans for a long time either. So it is obviously in your best interest to avoid
bankruptcy, and debt management can help you do that.

Effects of Bankruptcy
Contrary to popular belief, bankruptcy is not a ready-made solution to financial
woes. It is considered a last resort when all other options to pay off debt have
failed. And because it can have a devastating effect on your credit score, it’s much
better to look for other alternatives. Debt management planners can offer many
tips to avoid bankruptcy.

According to debt management strategies, there are several prominent reasons
why you should stay away from bankruptcy.

Can have adverse effect on your finances

Filing for bankruptcy can have an adverse effect on your finances. You won’t be
able to get a new loan, for instance, and even security clearance with your
employer could be at risk because of your bankruptcy status.

Bad credit rating

Depending upon the type of bankruptcy you file, your credit rating can be affected
in different ways. Debt management analysts advise that Chapter 7 and Chapter 13
bankruptcy filings can bring down your credit score by 250 points. And if that
happens, it will take at least 7 to 10 years to clear the negative credit score.

Might lose your property

The Chapter 7 bankruptcy procedure entitles authorities to sell your property for
debt repayment. However, this clause varies according to state law.

Creditors can repossess your property

If you think that once you file for bankruptcy you will be saved from your creditors,
then think again. Debt management experts warn that your property will be
repossessed by creditors if you haven’t cleared what is owed to the creditors within
30 days of bankruptcy filing.

Alternatives to Bankruptcy

Debt consolidation

Debt management counselors suggest that debt consolidation is a much
better alternative to bankruptcy. You can consolidate all your debt into a
single monthly payment by opting for a low interest loan.

Debt settlement

Debt management planners negotiate with your creditors to reduce your
credit depending upon your credit balance. A debt reduction of a minimum of
30% can be a great help in clearing your debt.

Debt management plan

Debt management agencies prepare a detailed debt plan which will help you
reduce your penalties. Consistent monthly interest payoff, restricting usage
of credit cards, curbing unreasonable spending and many more strategies
like these are covered under the plan.