Are There Any Bankruptcy Alternatives?

Garry Crystal

Once thought of as something that happened only to businesses, bankruptcy is an option that has become increasingly popular for individuals. More and more people are using bankruptcy as a way of eliminating unmanageable debt. Many people no longer think of it as a last resort, and in the last few years the number of individuals filing for bankruptcy has grown considerably.

Bankruptcy is a legal remedy to eliminate unmanageable debt.
Bankruptcy is a legal remedy to eliminate unmanageable debt.

Filing for bankruptcy means that you apply to the court to have your assets, if there are any, divided among your creditors. Although it effectively allows you to rid yourself of all debts, it also harms your credit rating and your chances of opening bank and credit accounts. You are also unlikely to be granted any mortgages until the bankruptcy has ended. Also, a creditor can apply to the court to have you declared bankrupt against your will.

In the long run, it is not really to your creditors' advantage to have you declared bankrupt. They may see little or none of the debt repaid to them, or they may have to wait a very long time until they receive the money. There are, however, some bankruptcy alternatives you can choose.

One of the few bankruptcy alternatives you can consider is to write to all of your creditors and explain your financial standing. If you can give a detailed plan of how much you can afford to pay and a timescale in which you can repay the debt, your creditors may be obliging. You should always ask that all new arrangements are set out in writing; otherwise, the new plan may not be legally binding. Your creditors may also be able to advise you on any other bankruptcy alternatives available to you.

Debt counseling services may also be of great help when looking for bankruptcy alternatives. Debt counseling services are professional organizations designed specifically to help you achieve a manageable debt plan. They should be able to negotiate with your creditors in order to avoid bankruptcy. They can negotiate for lower repayment terms and even stop interest on your debts. Debt counseling services may also be able to give advice on bankruptcy alternatives that may only be known to them.

A debt counseling service can also advise you on a debt consolidation loan, another option among bankruptcy alternatives. This type of loan allows you to pay one lump sum each month to a single debt handler instead of many payments to different lenders. The loan should be enough to cover all your debts, perhaps with some money left over. The repayments should work out to be considerably less than the total of all your other debts.

Further bankruptcy alternatives may include liquidation. The liquidation of some of your assets may free up some much needed cash. You may consider selling your car and buying a cheaper one. You may decide to sell your home and move to a cheaper house or a rented house. Whichever one of the number of bankruptcy alternatives you consider, make sure you receive sound financial advice from a reputable company.

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