With proper help you can lower your monthly payments, reduce interest rates, waive late fees, eliminate collection calls, avoid bankruptcy, have only one monthly payment and become debt free.
What is bankruptcy?
Bankruptcy is a federal court process wherein a debtor gets the chance to eliminate or reorganize his debts through sale of assets or by following a repayment plan he can afford. Being a consumer, you can file either Chapter 7 or Chapter 13 personal bankruptcy depending upon your financial situation.
7 Reasons to avoid bankruptcy
Watch out for the 7 reasons to avoid filing bankruptcy.
1.Your credit is badly hit: Chapter 7 bankruptcy filing does have a negative effect on your credit. It brings down your credit score by around 200-250 points. Moreover, the negative entry stays on your credit report for 7-10 years thereby making it difficult for you to qualify for new loans and credit for the next 3-4 years.
2.You may lose your property: There are certain assets which cannot be protected under bankruptcy laws. You are likely to lose such assets if you cannot avoid personal bankruptcy. This is so because the assets are sold off (if you've filed Chapter 7 bankruptcy) to pay back your dues. So, unless you qualify for federal/state exemptions, you may even lose your home/car if you're not avoiding bankruptcy.
3.Not all debts can be eliminated: It's a myth that Chapter 7 can help you get rid of all types of debts. However, this isn't true because you cannot wipe out back taxes, student loans and other unpaid dues simply by filing Chapter 7. Thus, it makes sense to avoid bankruptcy. What you can do is, negotiate a debt settlement or an alternative payment plan with your creditors.
4.Creditors/lenders may repossess property: Even if you've filed bankruptcy, there's a chance that your creditors/lenders may repossess or foreclose property on which they hold a lien. This is because bankruptcy relieves you from the personal liability to repay debt. But unless you reaffirm and try to pay down the entire balance, creditors/lenders have the right to repossess or foreclose property as there's already a lien on it.
5.Adverse effect on your finances: Bankruptcy has an adverse effect on your financial situation. For instance, you won't be able to buy or even rent a home/car. Filing bankruptcy can also influence the status of your security clearance. However, this will depend more upon whether you've filed bankruptcy on account of financial responsibility or due to an unexpected event.
6.You may not qualify for new credit: Getting an approval for new loans/credit is tough after you've filed bankruptcy. It'll take at least 2-4 years in order to qualify for a secured loan (such as mortgage, car loan etc). Even unsecured loans are hardly available if you cannot avoid bankruptcy. However, you may qualify for a secured credit card. But you may have to pay higher fees when you apply for one.
7.Not all retirement plans are protected: It's true that bankruptcy laws protect 401k retirement plans. The laws also protect $1 Million in your IRA account but any amount beyond the limit may be used to pay off your debts. So, if you wish to protect your retirement savings, find out how to avoid bankruptcy with any of the 5 alternatives given below.
5 ways to avoid bankruptcy
Check out the 5 alternatives that'll help you to avoid filing bankruptcy.
1.Debt settlement: This can be an option for you especially when you cannot keep up with the minimum payments on your debts. A debt settlement (or debt reduction) program is where your creditors cut down your debt amount by 40-60% of what you owe.
What you need to do is, negotiate with creditors or collection agencies in order to reduce your debt amount. You can either take help of professional settlement services or settle debts on your own. Check out the details on how to settle your debts yourself and avoid bankruptcy as a way out of debt problems.
2.Debt consolidation program: If you wish to avoid bankruptcy and make monthly bill payments at reduced interest rates, then debt consolidation (or bill consolidation) program may be your right choice.
A debt consolidation program is where you get the chance to consolidate your bills into one easy monthly payment. Moreover, late fees and over-the-limit charges on credit card debt are also eliminated. Consolidation has a positive impact on your credit as it makes you pay your way out of debt. Thus, it makes sense to choose debt consolidation in order to avoid bankruptcy.
3.Debt management: It's an option where a credit counseling agency offers you a plan to keep you current on your bill payments and help you avoid bankruptcy. The purpose is to reduce interest rates and minimize or waive off interest charges incurred due to any late payment on your account. Thus, you can comfortably manage your bills and get debt free faster.
4.Payday loan consolidation: If you're struggling with payday loans and wish to avoid bankruptcy, then payday loan consolidation is what you may choose. This is where you consolidate and replace multiple payday loans into an affordable monthly payment.
5.Do it yourself plan: The Do it yourself (DIY) plan is where you try getting out of debt on your own without going for professional debt help services. To make your DIY plan effective, you need to negotiate with your creditors depending upon how much you can afford to pay. You'll have to plan a budget so as to manage your daily expenses in addition to paying off your dues.
If you're in trouble paying your bills, the best thing is to contact your creditor asap and work out a payment arrangement you can afford. It'll help you avoid bankruptcy and protect your credit in times of financial crisis. What's important is to analyze your financial situation and find an appropriate solution to your debt problems. If required, compare the consumer debt solutions in order to choose the best out of them.
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