Monday, January 19, 2009

How to avoid bankruptcy?

We may think that bankruptcy is the fastest and easy way to get out of debts, but actually it is not. It is the last option to be gone for after all other has failed.

After filing bankruptcy it will be difficult for you to get credit and financial help for a long time, as your credit rating will remain low for many years afterward. You may also face other long term tax problems. Above that it is possible that you lose some of your personal assets to pay back the creditors. You have to start again from the beginning to regain your credit, and it will take long period of time to regain the same.

Considering all these points, filing bankruptcy should be the extreme step after you try all other possibilities. Try all possible strategies before going to file a bankruptcy.

Here are some alternatives that can be tried:

Sell your assets: After filing bankruptcy, you could lose everything that can give a value. So its better to sell the things that you don't use. Move to a smaller house. Keep the necessary things and sell the rest. If you own a car, try to get a smaller and cheaper one and sell the present one.

Consolidate your debts: These won't release you from debt, but reorganize it to pay back in a convenient way. Bankruptcy give you a temporary relief, whereas debt consolidation offer a permanent solution of your debts.

Extend your working hours: Work for extra hours in your current job, if you can earn more from that, or try for a second or third job. Ask your partner or spouse to do the same.

Communicate with the creditors: Let the creditors know about your situation. They might consider to offer some relaxation in what your owe to them, rather than not getting anything from you as a bankrupt.

Please add your opinion and some more alternative that you think of.

3 comments:

Oskar schiffer said...

Great inputs and points ....Besides another point I think will help to get out of debt...that is:

A person can now actually improve his/her own credit rating after registering to www.ftc.gov.

This will help in applying for a fresh loan and repaying the high interest loans...

Trevor said...

Excellent post.

I especially agree with what you said about extending your work to increase your income! That's key!

Your biggest financial asset is your paycheck, and the more money coming in the better.

Keep up the great info!

http://www.financialnut.com - from one PF blogger to another! :)

GNE said...

Great post and nice looking blog...

I will be adding your site as a link from mine...

Your concepts are right in line with goodnewseconomist.com

GNE