Bankruptcy, the word carries so much weight, just saying it packs a punch. Any businessman knows he runs a risk in whatever field his business is in but plans for financial trouble is not often considered when making strategic plans. Bankruptcy is a word no one wants to utter, to accept it is happening to them. Yet it does happen and the consequences can be far reaching. Avoiding bankruptcy is a term that is more positive but action needs to be taken before the crisis hits.
Are there alternatives to Bankruptcy?
Yes there are, but none of them are a panacea and it might take a number of different approaches to sort out the debts and solvency.
- Debt consolidation – where a lower rate interest loan is secured to pay off the higher rated interest debts, consolidating into one monthly payment. A downside of this is that you can end up owing more than before.
- Debt settlement – where you come to an arrangement with your creditors to pay back money owed. This can take different approaches form paying smaller debts first with promises of larger payments later or paying the larger bulk of the debts on a reducing scale over a period of time. It is important that you talk to your creditors when you first realize there is a problem with your finances, the sooner it is discussed the easier it is to come to arrangements with them..
- A more formal approach to debt settlement is to file a Chapter 3 wage earner plan; where over a period of years regular payments are made to creditors.
All these approaches help you maintain control over your personal assets but require an ability to pay; therefore a regular income is necessary. To further assist in avoiding bankruptcy you need to explore what personal options are available:
- Look to what you can live without. Reduce your outgoings and capitalize on your assets. In short sell what you can. Raise money, even a little to show your willingness to be proactive to your creditors and create a positive approach to the situation.
- Examine your lifestyle and then cut it back. Reduce your outgoings by simple tasks of not eating out as often, not shopping as often. Critically reassess your budget and take it back to basics, what is essential, what is wanted. Let go of the latter.
- Talk to your family and friends. This can have big issues in terms of trust and if looking to borrow off family or friends be certain it is the way towards achieving success and not just a ‘putting off’ the inevitable.
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