5 Alternatives To Bankruptcy

Bankruptcy in simple terms is a proceeding involving the law and a business or person who are not able to pay their debts. The process of bankruptcy starts with the debtor filing a petition. After the filing is done the assets of the debtor are assessed and are used for paying off the debt or maybe a portion of it. But there are alternatives that can be done instead of filing a case of bankruptcy. This article will focus on alternatives to bankruptcy.

ALTERNATIVES TO BANKRUPTCY

Following are five top alternatives to bankruptcy that a person can take:

DEBT CONSOLIDATING LOANS

In the event that you know that your money related troubles currently are short-lived then you may consider taking this alternative to bankruptcy. Choosing an alternative is important because bankruptcy damages your credit score to a great extent and may also mean that your assets may be auctioned to pay off your debts.

A good road to take would be taking another debt to pay off your previous debts. This loan is specifically meant to pay off your debts by loaning a large amount. This type of loan requires you to pay back small amounts of money every month than the existing debts you have. Just that you will have to pay back more. Debt consolidation is a debt solution that is quite rare as it has no negative effect on your credit rating but only if you keep paying this new loan on time. One thing to keep in mind is that if you still owe a lot of money you will be granted this loan at quite high-interest rates than you would’ve got normally. So be careful when choosing this alternative. It is better to compare your options than to straight away jump to a decision.

MANAGEMENT PLANS FOR DEBTS

If you have a pre-planned debt management solution, it works wonders for you in case you have a good amount of disposable income and on top of that a steady flow of income. A management plan has to be extremely thorough with your finances. This way you will know what to do when you find yourself in debt. You will know the amount of disposable income you need and have that can be used to pay back the debt.

Once you have all of these things figured out the next step will be to devise an offer which you will give to the creditors that has a revised amount of monthly payments you make to them. You may do this by either hiring a management company that deals with such matters or on your own. The agency will make things run smoother as they have more experience but remember that you will have to pay the agency for their services. You don’t want to hire a very expensive company as that will burn a deeper hole in your pocket so act wisely.

INDIVIDUAL VOLUNTARY ARRANGEMENTS

If you have been struggling with paying back your debts you may consider setting up an individual voluntary arrangement. An individual voluntary arrangement is a legal agreement between you and your lender in which you can lower the monthly amount you pay or even increase the length of the loan period. If you want to enter an individual voluntary arrangement then you will have to find a practitioner who deals with cases of insolvency. They have a master degree in the topic. You will have to work very closely with the practitioner so that you can formulate a proposal that your lender accepts. You only have to get the assent of over a three-quarter of the lenders to accept your proposal. By doing so the rest of the creditors will have to agree to it with all the terms and conditions that you have put forth.

INFORMAL AGREEMENTS

It is actually possible to arrange courses of action with lenders to reimburse certain debts over a decided duration. Managing the debt in this particular way needs you to have a few abilities, and the best option is to take consultancy from a financial advisor or counsellor or legal counsellor or an accountant to put a practical and sensible proposition to influence lenders to acknowledge something like a decreased protuberance sum or a longer course of time for paying back the money. Creditors may inquire about your current financial position, counting on other lenders, to guarantee that your proposal is reasonable. Entering into such an agreement helps in avoiding the stigma and the consequences faced due to bankruptcy, but it may be possible that creditors may make a negative credit report which is going to stay in your credit record for at least 5 years.

APPROACH A CREDIT COUNSELLING COMPANY

If you can take out a little money and want to get your debt situation under control the best way to do so will be hiring a credit company that deals with such matters. Sometimes it happens that you are not able to negotiate with your creditors on your own or you do not know how to; this is where the credit counselling agency will be of great help. These companies help you in paying off your debt efficiently and may even help you change your current financial situation to a better one.

The credit counselling agencies have prior experience in handling lenders and will be able to guide you better in tricky situations. They will plan out everything for you and according to your capacity. You will not have to worry. But be careful in choosing a company. Only after you have done a thorough background check on them, then should you consider hiring them. Ask people who have used their services before and then make your decision of hiring them.

CONCLUSION

Nobody wants to roam about with the tag of bankruptcy following them hence taking the above alternative will be the best thing you can do. Compare all of them and then see which option works out the best for you. Take help if you want and avoid tricky situations.