Bankruptcy is the forlorn hope when you fail to escape financial woes with the help of other options available. Your dues are accumulating and the creditors are chasing you just like a dog is after a thief. Getting immediate relief is your priority and you feel there is no better option than bankruptcy filing to serve your purpose. But before you arrange your dossiers and do the necessary paperwork, just throw a glance as to how you can avoid bankruptcy.
Bankruptcy filing – Why you should avoid it?
Bankruptcy is not a magic wand to dissipate all of your problems within seconds. Avoiding bankruptcy may be tough in your case but not impossible if you put into diligent effort. And when you avert it, you save your time and the remnants of your credit history.
Your inability to meet the outstanding dues has caused nosedive of your credit rank. However, whatever status it is in, you can always restore it to the previous standing (which was quite good, I presume). It may not take off immediately, but constant effort will create a positive impact on your credit report. By filing bankruptcy, you just stub out the chance of making any improvement in your credit record; instead it causes the score to plummet 200-250 points. It is a blot in the copybook and will remain so for – at least – 8-10 years, thereby hampering transaction that will be made during this period. So, it always makes sense to try hard so that you don’t have to resort to this final step.
Ways to avoid bankruptcy
At this moment, you may feel powerless to control your debt issues and overall finance management. In your case, it is a common psychological phenomenon. However, you can gradually control over your debt problems if you try so. The first thing to do so is to keep everything in organized order.
Categorize your debts under suitable sections, such as credit card debt, good debt, revolving debt and so on. It is better if you maintain a spreadsheet wherein you can input the data. Create some meaningful heads like the creditor’s name, how much you owe to him, contact information, interest rate and minimum payment.
The next big step is to contact the creditors one by one. You must seek for their cooperation to successfully bypass bankruptcy. Be frank with them and ask if they can make any reduction in the interest rate and total balance. If you are exempted from making a few payments, it will show up in your credit report as ‘failure to pay off’. If you inform them regarding your plan to pay off and avoid bankruptcy, they will likely to cooperate with you in every possible way.
You can consider about debt consolidation or debt deferment. The first one is a permanent solution whereas the second one serves as temporary tool for financial relief. Last but not the least, arrange your bills in descending order according to interest rate. Clear the bills which come with higher interest tag.