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How to find a suitable bankruptcy alternative?

By Edited Jan 23, 2016 0 0

Filing for bankruptcy may be one of the most difficult decisions in a person's life. The life after bankruptcy discharge is very difficult. It brings a lot of emotional turbulence as well as mental stress apart from the financial crisis on a person's life. It takes a long time and a lot of hard work to bring your financial health back to normal. Your bankruptcy appears in your credit history report for next 7 years. During this period, you will find it extremely difficult to get any types of loans. It is imperative that you look out for suitable bankruptcy alternative if possible before filing for bankruptcy.

There are people who think that bankruptcy is a nice way to get rid of all their debts. But they should know that they still need to pay for a few things like child support etc. They don't really understand the consequences of filing a bankruptcy. Getting a credit card after bankruptcy can be extremely difficult. You won't be able to get a home loan as well. Therefore, bankruptcy should be your last resort, not your easy option.

Let us take a look at a few possible bankruptcy alternatives:

1. First method is called judgment proof. In this option, you choose not do anything. It is also called 'take no action' option. In this, you simply choose to ignore the debt since you don't have anything to pay back to the creditors. Since the creditors know that you condition is very bad, you wont try to recover since recovery costs money. After 7 years, the debt will be erased from your credit history. This may work when the debt amount is not too big and creditor is willing to write if off.

2. Debt consolidation - Debt consolidation is an option in which you consolidate your debt. In this bankruptcy alternative you try to get a bigger loan on a lower interest rate and then repay all the other pending loans with that money. That way, you just have to keep track of only one loan.

3. You can also talk to the creditors in a straight forward manner to let them know your situation. You can make them agree upon some solution which is beneficial for both of you. This may be in the form of reduction in interest rate, increase the duration, reduce the monthly installment etc. Since creditors also don't want you to go bankrupt, most probably they will be willing to work with you here.

4. Money management - Try and follow good practices of personal finance. Take care of your spending and earnings closely. Make sure that your spending doesn't overshoot the earnings. You would be amazed how simple things like these can keep you away from these ugly situations like bankruptcy.

If none of this work for you, then you should talk to a financial consultant and find out a suitable bankruptcy alternative for yourself.



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