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How to Avoid Bankruptcy

by ajax

posted in Finance : Personal Finance

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Introduction
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.

 

 

 

 

 

 

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