Bankruptcy Alternatives – 5 Ways to Avoid Bankruptcy

What you are about to read may stop you making the biggest mistake of your financial life.

In today’s debt ridden society many people are in severe financial difficulties, often for reasons outside their control. Bankruptcy for many, is the last step in a long road of financial pressures but many opt for this solution too early and without considering suitable bankruptcy alternatives. Whilst bankruptcy may get rid of the immediate pressures it isn’t necessarily the end of the problems.

When you file for bankruptcy your life becomes an open book for the court appointed bankruptcy officials. They will pry into all aspects of your life and you will be required to provide all your financial information, including bank accounts, savings, investments and assets. Anything that can be sold or converted to cash, including your family home and any valuable contents, will be disposed of and you may still have part of your income deducted from your salary to pay some of your debts.

But there are bankruptcy alternatives that may be less painful for many. Here I’ve listed 5 bankruptcy alternatives

1.Negotiate with your creditors.

When you get into difficulties you should contact your creditors as soon as possible. Contacting them sends a signal that you want to repay them.

Lenders are anxious to get their money back and sometimes they will go to great lengths to help you. They may be prepared to re-finance your debt to have it paid over a longer period with lower installments.

They will often be prepared to reduce or freeze the interest rate and will even cut the balance owing up to 75%.

2.Refinance your mortgage.

If you have a property, which you own outright or on a mortgage, there is the real possibility of you being able to refinancing your debts using a secured mortgage or re mortgage.

Refinancing your debts involves taking out a new mortgage, or an additional mortgage. Some lenders will lend up to 125% of the property value allowing you to pay all your outstanding debt and may even have some spare cash to treat yourself.

As the new loan is repayable over a long period of time (often 25 – 35 years) the monthly repayments are significantly lower than with short term debt and should be far more manageable

3.Refinance your debts using a debt consolidation loan.

Debt consolidation is where you take a new unsecured loan and use the funds to pay off your outstanding debts. Debt consolidation loans are repayable over a longer term at a relatively low interest rate and as a result the monthly repayments are lower. If the loan is secured on your property then the interest rate and payments may be even lower.

4.Sell your home and downsize.

One of the easiest ways to get out of debt is to sell your house or apartment and downsize or move into rented accommodation. The surplus cash can then be used to pay your debts and you can continue with your life without the pressure.

Selling up and moving home is, however, a difficult and often painful option. If you do sell however. you can determine the price and remain in control. If the house falls into bankruptcy, you lose control and the house may be sold by
your mortgagor at auction for a price often considerably less than the price you can obtain in a normal sale.

5.A formal arrangement with your creditors.

A formal arrangement with your creditors can often be negotiated by specialist debt management companies and is filed with the courts. These arrangements are for 5 years. You pay an agreed amount each week or month to the debt management company and it is then divided between your creditors. While you continue to pay they are prevented from approaching you.

After the 5 year period is over any balance still owing is wiped out and you are free to live your life free of debt. If however you break the arrangement the normal result is bankruptcy.

As you can see, there are several sound bankruptcy alternatives for you to choose from. Everybody is under financial pressure from time to time, however you should not compound your problems by declaring bankruptcy too soon. Instead, choose the bankruptcy alternative that sounds the best for your particular situation and start working to repair your credit now.

Using a bankruptcy alternative means that in a few years you will have rebuilt your credit and will be back on track, whereas with bankruptcy it could be ten years before you can get back to normal.

Bankruptcy The Last Resort

If you have been in debt before, you understand how it feels. Debt can feel like an elephant on your shoulders day in, and day out. Many people feel as if there is no hope when you feel you owe your soul to creditors and collectors. Bankruptcy seems to be the only choice at this point whether for your business or for you personally. Is Bankruptcy the choice you should take?

That question is not so easily answered and there may be many things that the general public does not necessarily understand about bankruptcy. Bankrupcy, for the most part, is a societal and governmental means to finding the right solution for your debts when all else has failed. As it stands now, if you file for bankruptcy and are granted bankruptcy, you most definitely deserve it. The laws that govern the various types of bankruptcy make it almost impossible for someone to claim if they dont necessarily need to. The amount of paperwork has increased, the court fees have increased, and the overall trouble to file has made it quite a struggle for just anyone to qualify for bankrupcy.

Before such action is taken, there are programs to help you get out of debt such as debt consolidation and consumer credit counseling services. These types of services consolidate your debts in to a small, structured payment plan. These services somewhat mimic the same concepts that bankruptcy to get you out of debt. For example, if you file for chapter 13 bankrupcy, all your debts are to be paid off in a structured payment period of between 3-5 years. Often times, like debt consoladation, the amount you end up paying is less than what you originally owed. You get to keep your possessions and your debt is cleared.

So which method of getting out of debt should you take? It should be situational and based on every individuals specific case. Probably the best method would be to speak with a credit counselor in regards to your personal debts. Understanding your debt and the options to you are usually the primary step in making a wise decision about your credit. If your debt is beyond help and youve exhausted all other methods, maybe you should consider bankruptcy.

One major thing to remember is that you should never be ashamed to claim bankruptcy. Individuals get caught in the preditorial credit trap and have sales people pushing credit cards in their face every time they shop. We are not taught in school about finances as much as we should be. We are not prepared for the big business world when we graduate high school and we definitely know nothing about living on our own. The good part is that there are a number of institutional answers and guidance which are available to every consumer nationwide. The worst thing you can do about your debt is to do nothing at all.

Key words: bankruptcy information

Key words: bankruptcy information
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Bankruptcy Information It Pays to Know

Adequate bankruptcy information means at least knowing the definition of bankruptcy in law, its purpose, its effects (and limitations) on personal finances, the types of bankruptcy and other laws applicable, its legal proceedings, as well as the meaning of bankruptcy fraud.

Bankruptcy

In federal court, bankruptcy pertains to the mode of settling the liabilities or the legal accountability of a person or any organization for being unable to meet his financial obligations whether wholly or only partially. Its main purpose is to distribute the bankrupt’s assets equitably among his creditors through court-appointed beneficiary, and so, to relieve him as debtor from his liability. Thus, the (honest) debtor may no longer have to legally repay most or all of your debts monetarily. This shall give him (the bankrupt debtor) a new start financially by relieving him of most (not honorably all) of his debts, at the same time repay his creditors in an orderly manner to the extent of his (the debtors) available remaining means for payment.

A person may only be legally declared as bankrupt if he has become insolvent as his current financial obligations are irremediable, or, as he is unable to pay all debts even if the full value of all assets were realized. Hence, his inability or impairment of ability to pay their creditors is legally affirmed.

Laws on bankruptcy, which also include definition of the types of bankruptcy, have often changed since its first adoption (1898). One must then gather sufficient bankruptcy information time and again to be aware of the changes made in its proceedings and to avoid needless bankruptcy blunders. Bankruptcy laws has developed since the Chandler Act (1938) and the Bankruptcy Reform Act (1978), and currently the Bush Administration has enacted a new (2005) bankruptcy law on abuse prevention and consumer protection an act that may make it harder for some people to erase their debts by filing for bankruptcy.

Proceedings filing for bankruptcy are either voluntary to the debtor (the bankrupt), or, involuntary as requested by his creditors hoping to re-gain the portion they are owed. In the process, the person or corporation that has been declared/adjudged as bankrupt is no longer held accountable for his debts, as his preferred creditors (preferably his unpaid employees or the government) are paid in full, while the proceeds of his remaining (non-exempt) assets are shared to his other creditors).

This briefing of bankruptcy information may save you from paying your debts, or carefully avert you from deviating form its legal proceedings, yet, the debtor opting to file a bankruptcy declaration must know absolutely all bankruptcy information and practice vigilance in not intentionally using such bankruptcy information to commit legally accountable fraud.

2 CAN DO: Get New Credit after Bankruptcy

If there is one thing you can count on in todays competitive lending environment, it is that credit is always available, even to the recently bankrupt.

The catch?

Credit may be more expensive than before and available with lower limits. But all that is secondary only to the fact that credit does exist and you can get it.

One of the easiest credits available to the recently bankrupt is a secured credit card. As opposed to an unsecured credit card, in a secured card, you must make a deposit of a certain amount of money in exchange for a card that you can use just like a regular credit card. Your credit limit is equivalent to the cash deposit you made.

Now, the good thing about a secured credit card is that it is usually available post bankruptcy at lower rates than unsecured cards.

Whats more, the fact that these credit cards are secured are not often indicated in your credit report so creditors have no way of knowing whether your credit card is secured or not. All they will see is that you have been approved for a credit card, which ups your credit score a bit and puts you back in the game fairly quickly.

Note, however, that credit experts are not quite in agreement concerning the impact of secured credit cards on your credit rating. So if you do decide to open a secured credit card post bankruptcy, be sure to do it slow.

While your rush at rebuilding your credit is understandable, making mistakes that could significantly affect your credit score like this is not worth it.

Rebuilding your credit worthiness after bankruptcy is a matter of getting a toe-hold in the world of credit. The balance is often precarious and needs delicate treatment. Use credit cautiously and pay on time.