Bankruptcy Alternatives: Is there an Alternative to Filing Bankruptcy?

Lured by the attractive loan schemes, you may sometimes land yourself in a situation where you will lose the balance between your monthly income and monthly expenditure. It is a financial catchy position where you can find it difficult to make your monthly payments. May be you are thinking about filing Bankruptcy. But do you know, declaring Bankruptcy may not be the last option available. Do you know there are alternatives to Filing Bankruptcy?

Filing for bankruptcy is a difficult decision to make. While filing Bankruptcy can assist you in alleviating your dues and debts, it can also affect you more adversely than you can think of.

Bankruptcy can have disturbing effects on personal and professional life for longer duration. It affects your credit rating and borrowing capacity in near future. Hence, declaring bankruptcy should be considered as last resort.

Reasons for finding Bankruptcy Alternatives
There are other alternatives available which can pull you out from such awkward positions. There are numerous reasons for people to avoid bankruptcy.

1. People filing bankruptcy have to bear the loss of their assets. In most of the cases court used to sell those assets like house, plot or even car to clear off debts.

2. When ever you file for bankruptcy, then control goes to the magistrate handling your case and your fate can be decided by him judging the information received by Official Receiver.

3. Bankruptcy has a very devastating effect on your credit history for at least next 7 years. With such a poor credit score it becomes very difficult to get a loan or mortgage to start a fresh life.

4. Declaring bankruptcy can ruin your career prospectus. There are certain careers which do not accept you if bankrupt. Even there are few restrictions on being director or owning business.

5. Being bankrupt hampers your social life to much extent. It is quite embarrassing situation once your bankruptcy gets advertised in newspaper.

Bankruptcy Alternatives
In October 2005, the bankruptcy Abused Prevention and Consumer Protection Act was came in to force. So before you make any decision to find bankruptcy considers all your options, alternatives and choose the best one for your situation.

1. Judgment proof: This is the most basic alternative. Simply you have to take no action at all. With a very small income, if you owe money to creditors you may be considered as judgment proof also known as collection proof. That means if your creditor sues you, he just won’t be able to collect because you don’t have any thing which they can legally get hold of. So in most of the cases creditors may decide to write off your debts. But you have to keep one thing in mind that if your financial condition gets improved in future then you will not be consider as judgment proof any longer.

2. Call Creditors: Don’t try to shun off from the situations. It is always better to call the creditors and convince them about your financial situations. They may come up with an alternative pre-payment plan which can get you out of this catchy situation.

3. Chalk out the Budget: Before arriving to any decision of filling for bankruptcy, take a good look at your detailed information of monthly income and monthly expenses. This will help you in better understanding of your resources and a more organized way can avoid bankruptcy.

4. Balance Transfer: In some cases you will be able to transfer your loans from higher interest rates to lower ones. You can also apply for a new credit card which can offer low interest rates. But be sure of the introductory lower rates as they do not serve the purpose.

5. Refinancing Loans: If you are credit worthy or in good books of your creditors you can get a refinance with better terms which can help you to clear of the previous debts to higher rates.

6. Negotiations and Settlement: If you are confident enough that this adverse, tricky financial condition is temporary, then with Negotiation and Settlement with your creditors your benefits are higher. In this process you have to negotiate with creditors and work out a new re-payment plan.

7. Credit Counseling Services: Instead of negotiating personally you can contact these agencies which normally are nonprofit organizations and you can found them on United States Trustee’s associated website. These agencies work with the aim of reduction of interest rates or full amount of debt.

8. Individual Voluntary Arrangement: It is a good alternative to bankruptcy. It is a formal proposal by the individual to his creditors to re-pay a percentage of total loans over a certain period of time (in most cases it is usually 5 to 7 years). With this alternative sometimes as much as 60 % of the principal amount is written off. Even monthly payment can be kept very low.

There has been a great increase in number of people choosing the alternatives for bankruptcy of late. As there are many benefits like keeping our own assets, having no effect on professional qualification, no adverse effects on social status and credit scoring; you have to consider all your options carefully before filling bankruptcy.