How to avoid bankruptcy

If you are deep in debt and you cannot stand the collection calls from your lenders or creditors any longer, maybe you have already considered filing for bankruptcy. Before you go ahead and discuss the issue with your lawyer, stop for a while and consider some of the hidden traps paving the way to bankruptcy.

Under the legislation of most of the world’s developed economies, a debtor may file for a statement of bankruptcy and, if the statement is granted, he or she may get the chance to reorganize or eliminate some of the debts. The key word here is ‘some’. It’s a common mistake to think that as soon as you file for bankruptcy, you will automatically get rid of all of your debts. For example, a bankruptcy statement does not erase your back taxes, student loans and some of other bad credit loans that you have.

Which is even worse, at some point after you have filed for bankruptcy, your lenders may still file a claim against you and repossess your movable or immovable property. It is true that bankruptcy relieves the debtor from the liability to pay off his or her debts. However, the creditors or lenders may still have the right to foreclose or repossess the debtor’s property unless he or she manages to pay off the entire balance because there is a lien attached.

There are several ways to avoid bankruptcy, depending on one’s financial circumstances. A debt settlement is a good option for all debtors who find it difficult to cover the monthly installments on their debts. Your bank may also offer you a debt consolidation or a bill consolidation program that will slash the interests on your debts.

Alternatively, you may contact a credit counseling agency to help you avoid bankruptcy. Your credit counselor will offer you a plan under which you will be able to cut down interest rates and wave off or minimize interest charges that are incurred because of late payments on your account.

If you opt for payday loan consolidation, you will be able to consolidate several payday loans, replacing them with an reasonable monthly payments.

If you do not want to pay fees to professional debt advisors, you can try to work out your own plan to avoid bankruptcy. It will be a good start if you contact your lenders and try to negotiate lower monthly installments on your debts. Naturally, lenders want to see their loans repaid and may be inclined to negotiate better terms on your payments. This strategy may ward off your financial worries for the time being but in the long run, your debts will prove costlier, as you will be paying more money in interest rates. Instead, you may try to cut down some of your daily expenses and pay more money to your lender or creditor each month. This strategy will help you pay off your debt faster and save you considerable amount of money in interest rate.