Bankruptcy is the forlorn hope when you fail to escape financial woes with the help of other options available. Your dues are accumulating and the creditors are chasing you just like a dog is after a thief. Getting immediate relief is your priority and you feel there is no better option than bankruptcy filing to serve your purpose. But before you arrange your dossiers and do the necessary paperwork, just throw a glance as to how you can avoid bankruptcy.
First, you need to know what bankruptcy is.
It is a legal terms which means that a person or an organization is no longer capable of paying off the debt. After the declaration of bankruptcy all the assets of the debtor is evaluated to pay off the debts. Although, it is a second chance for the debtor to rectify their financial mistakes, declaring bankruptcy does come with various drawbacks.
This article will tell you how bankruptcy can affect you in the long run. Here are some pointers:
Bankruptcy filing – Why you should avoid it?
Bankruptcy is not a magic wand to dissipate all of your problems within seconds. Avoiding bankruptcy may be tough in your case but not impossible if you put into diligent effort. And when you avert it, you save your time and the remnants of your credit history. Declaring bankruptcy means you are no longer qualified for enjoying financial assistance. It shows that you are in bad shape financially. It can also bring a strain in your relationships as you may have to struggle financially until the time you regain some stability. Due to this various reasons you should focus on how to avoid bankruptcy than look for easy way out.
How to Avoid Bankruptcy
Your inability to meet the outstanding dues has caused nosedive of your credit rank. However, whatever status it is in, you can always restore it to the previous standing (which was quite good, I presume). It may not take off immediately, but constant effort will create a positive impact on your credit report.
By filing bankruptcy, you just stub out the chance of making any improvement in your credit record; instead it causes the score to plummet 200-250 points. It is a blot in the copybook and will remain so for – at least – 8-10 years, thereby hampering transaction that will be made during this period. So, it always makes sense to try hard so that you don’t have to resort to this final step.
Ways to avoid bankruptcy
At this moment, you may feel powerless to control your debt issues and overall finance management. In your case, it is a common psychological phenomenon. However, you can gradually control over your debt problems if you try so.
Here are some of the ways you can avoid bankruptcy:
- The first thing to do so is to keep everything in organized order. Categorize your debts under suitable sections, such as credit card debt, good debt, revolving debt and so on. It will provide you with some perspective on your finances and help you see the whole scenario.
- It is better if you maintain a spreadsheet wherein you can input the data. Create some meaningful heads like the creditor’s name, how much you owe to him, contact information, interest rate and minimum payment. Creating a spreadsheet is an easy way to keep information in one place.
- The next big step is to contact the creditors one by one. You must seek for their cooperation to successfully bypass bankruptcy. Be frank with them and ask if they can make any reduction in the interest rate and total balance.
- If you are exempted from making a few payments, it will show up in your credit report as ‘failure to pay off’. If you inform them regarding your plan to pay off and avoid bankruptcy, they will likely to cooperate with you in every possible way.
- You can consider about debt consolidation or debt deferment. The first one is a permanent solution whereas the second one serves as temporary tool for financial relief. Depending on what works best for you choose the option that can help you reach your goals.
- Last but not the least; arrange your bills in descending order according to interest rate. Clear the bills which come with higher interest tag. Clearing debts is important step towards gaining your financial stability. Start saving more and reducing unnecessary expenses so that you can pay of your debt quicker.
Inability to pay off debts can make you resort to declaring bankruptcy, but that is not a solution. It comes with serious drawbacks that can push you further back and away from financial stability. Knowing how to avoid bankruptcy is one of the best ways to deals with debt situations.