Many Americans will face debt at least once during their lifetime. In a society where wallets are filled with numerous maxed out credit cards, it’s easy to let your finances get out of control, creating a looming, overwhelming debt. When the debt gets out of hand, the collection letters pile up, and dreaded phone calls are avoided, many people would rather “clean the slate” and file for consumer bankruptcy. While filing for bankruptcy is a good option for some, it should not be the last resort for every individual in debt. Sometimes filing for bankruptcy can leave you worse off than when you were struggling to deal with your mountainous debt. Before you choose bankruptcy as your way of escaping debt, do your research and take note of ways to avoid bankruptcy.
What is Bankruptcy?
Bankruptcy is a federal court process that allows individuals, facing large amounts of debt, the chance to eliminate or reorganize debts through the sale of assets or through a repayment plan, lasting around 5 years. Individuals may either file for Chapter 7 bankruptcy, which defined by the United States Courts is a “liquidation” of debt (debt is erased) or Chapter 13 bankruptcy with is the “reorganization” of debt which allows the individual to pay back some of the debt.
While many individuals may find a sense of financial freedom after filing bankruptcy, there are some downsides to filing bankruptcy as it may affect your financial future. Some downsides to filing for bankruptcy include, but are not limited to: your credit score may be affected, some of your assets may not be protected, it may affect future employment, and some debt may not be cleared.
Avoid Bankruptcy, Seek Alternatives
When you feel like you are up to your neck in debt, you may be tempted to file bankruptcy as soon as possible. While bankruptcy is truly the best and only option for some individuals, there are other alternatives to check out before considering filing for consumer bankruptcy.
– Talk with your creditors, they may be able to help you work out a modified payment plan, such as:
- Debt Settlement: Helpful for individuals who cannot keep up with minimum payments. Often, the debt will be reduced by a certain percentage and the individual will pay the lowered sum amount.
- Debt Consolidation: When you have all of your bills lumped together in order to make monthly payments more affordable.
- Debt Management: A credit counseling company “takes charge” of your debt and you make payments towards the company.
- Contact a Credit Counseling Company or a Financial Advisor: Depending on what you are able to afford, there are numerous companies who charge little to nothing for individuals struggling with debt.
Some of the best advice is to take charge of your debt, as soon as it starts to accumulate, or seek financial advice as soon as possible. Debt can be very overwhelming, but the longer you ignore, the bigger hassle it will become. Taking quick and responsible action towards debt will make bankruptcy seem like an unnecessary option, rather than the only option.
The Decision is Yours, Choose the Right Path to Financial Freedom
Bankruptcy is life changing. It can be expensive and it can change your financial future forever. Take care of your finances before they get too out of hand. If you need help managing your debt, consider all of your options before filing for bankruptcy. Just because your finances are out of control, don’t let them control you and financial future. Seek out all of your options towards financial freedom.