Filing bankruptcy is one way to deal with your overwhelming debts. By means of a bankruptcy, a court may decide that you're no longer liable for your debts. Bankruptcy can help stop harassing creditor phone calls and provide you with a fresh start. However, bankruptcies have severe consequences, and you should file only as a last resort. Know your options for avoiding bankruptcy before contacting an attorney.
Why Avoid Bankruptcy?
Filing bankruptcy has a major impact on your credit score. According to the Consumer Credit Counseling Services, a bankruptcy can knock 100 or more points off credit scores. And with bankruptcies staying on credit reports for 10 years, filing for protection can negatively impact approvals for mortgages, auto loans and other types of loans. Some lenders will reject an applicant's request if he has a bankruptcy in his recent past, or charge a higher interest rate on the loan.
Debt Settlement
Settling your present debts with your creditors or lenders is one way to avoid a bankruptcy. This process works by contacting your creditors and mentioning your plans to file bankruptcy. If you file bankruptcy, the creditor or lender may never recoup the money you owe. Thus, some are more ready to negotiate a settlement -- something is better than nothing. Offer an amount to settle your debt. Your lender or creditor can either accept your offer or present a counteroffer. Reaching an agreement means your creditor or lender will accept an amount that's less than the balance owed to satisfy the debt.
Pay Off Debt Slowly
Bankruptcy is an immediate solution to high debts. But rather than eliminate debt and ruin your credit in the process, review your debts and create a plan to eliminate debt without filing bankruptcy. Yes, this method of elimination may take longer and require self-control. But instead of harming your credit, you'll pay off debts as agreed and increase your credit score along the way. Look at your budget to see how much you have left over after paying bills. If there isn't any income, look into part-time employment opportunities to bring in additional funds. An extra $300 a month can pay off a $10,000 credit card balance in approximately 30 months or less than three years.
Sell Your House
Avoiding bankruptcy and paying off credit cards, medical bills and other debts may call for drastic measures. If bill collectors or creditors constantly call your home or threaten legal action, consider simplifying your life to create additional income and eliminate debt. Having ample equity in your home can present an opportunity to tackle debt and avoid bankruptcy. This involves selling your home and using the proceeds from the sale to satisfy your debts. You can then purchase a home with a cheaper mortgage or find a rental home.
0 comments:
Post a Comment