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Avoid Bankruptcy: Things You Have to Know
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     When they are having serious debt issues, people often think that bankruptcy is their only chance to become debt free in a few years time. They do not try to solve these issues in any other way; they just contact a bankruptcy attorney who will recommend them to
file for bankruptcy. This is normal, because these attorneys make a living by helping people with bankruptcy, but what if there are other options? After all, filing for bankruptcy is the last chance a person gets; why not try the other measures which do not have so many negative effects? The answer is simple: many people do not know about the other options they have, nobody explains them that they have a choice to make, and the effects on their life after bankruptcy.

     If your situation is not very dangerous yet, you could get by with only a budget and a debt management plan. This means that you will have to calculate the exact amount of your monthly income and your daily expenses. You should subtract the amount of your expenses from the amount of your total income, and you should use the remaining money to repay your debts. It is important to note that you should include on the list with your expenses the minimum required payments for your loans. If you end up with a very small amount, you should consider cutting down on your expenses. You can do this by giving up or changing your cable subscription, you should eat out less often, you can use the bus to go to work and so on; there are several things you can cut back your expenses. The next step is to check which one of your loans has the biggest amount to interest ratio, and you should start paying the amount what is left. It is easy to make a budget, but it is much harder to stick to it. If you manage to stick to your plan, and make regular payments, you will become debt free in a few months. In case you consider that you cannot come up with such a plan, feel free to ask help from specialized people or you can ask a credit counseling agency.







     Another option, much better than bankruptcy, is debt consolidation. This is another loan, which is used in most cases to consolidate a persons' other debts into a single loan. It has many advantages: by taking this loan, the interest rates will drop, and so your payments will get lower. Since this is a secured loan, it comes naturally that the interest rates are lower and the time period longer. Due to all these factors, the amount of your monthly payments will drop. Also, you will have to send only one check monthly, it will be easier to keep in mind the date when you have to pay, and in case you choose fixed interest rates, the amount will not change during the whole term of the loan. The single problem with this debt consolidation loan is that it is a viable option only for people who own some property, like their homes. Otherwise, they will not be able to get a secured loan.
  
     Another viable option to bankruptcy is debt settlement. For this, you will most probably need professional help, because the main idea of this process is to convince your creditors to cut down around 40-60% of your debts. To do this, you will need documents which prove that you simply cannot repay the total amount of the loan, but you are willing to pay. Documents which can prove this are your paycheck, your other loans and so on. If creditors see that you are willing to pay and you have a repayment plan, in most cases a professional can do a better job. In a few years, when you repaid the amount agreed, the creditors will write off the rest of the debt. If you consider that a debt settlement is not the right thing for you, but you need something similar, you can choose to sign an
IVA. An IVA is an Individual Voluntary Agreement which is signed both by your creditors and yourself. It is a legally binding document which provides an arrangement with your creditors to pay off a certain percentage of your debts. Since this is a legal document, you will need an insolvency practitioner to help you in this issue, he will make sure that your creditors will agree with your repayment plan, and he also has to make sure that you will be able to afford to make the monthly payment. You will not have to talk to your creditors again, you will send a check to the insolvency practitioner, and he will pay your creditors in the agreed percentage. After five years your debts will be settled. Although it is a legal document, just like a bankruptcy, it lacks many of the negative effects: it is not a public matter; your credit will not be hit badly, and so on. All in all, an IVA lacks all the negative effects of a bankruptcy.

     There are a few more options to choose from: in case you own your home, but do not want a debt consolidation loan, you can still choose to sell your home and move into an apartment. This way your living costs will be reduced, and you will have some extra cash to pay some of your debts. In case you own some other assets besides your home, you can also choose to sell some of them, and repay at least a part of your debts. This way you will be able to stay in your home and you will not have to change drastically your lifestyle.

     Whenever you do not know what to do, you should contact a credit counselor, he will be able to answer all your questions, and maybe suggest a good option to avoid further debt issues. You should think about filing for bankruptcy only when you had tried or at least considered all these other options, because none of them has so serious side effects as bankruptcy. The ideal situation would be that you realize in time that you have debt issues, and you can solve them with a small lifestyle change. Whenever this is not possible, look for other solutions, do not let yourself convinced to file for bankruptcy before even considering one of these viable options!









Disclaimer: This site is not , nor should it be taken to be, legal, financial or other professional advice. It merely provides a generalized guidance and generalized information only. Consult a financial advisor or an attorney to discuss any legal or financial issues involved with credit and debt decisions.
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