What Are the Alternative Options to Bankruptcy?
Bankruptcy carries with it significant consequences and as a result should only be considered as a last option. Despite this bankruptcy has many benefits and may be the option most appropriate for you. The main benefits of bankruptcy are:
- A creditor cannot take further recovery action against you
- A creditor cannot take legal action against you
- A trustee takes control of your financial affairs
While there are benefits to bankruptcy the consequences should be considered. Bankruptcy can result in the seizure and liquidation of your assets as well as negatively effecting your credit rating for a significant period of time. Consequently bankruptcy should only be considered as a last option and there are alternatives available to you depending on your situation.
Possible alternatives to bankruptcy include:
- Debt Agreements
- Financial Counselling
- Debt Negotiation
- Debt Consolidation
Debt agreements are becoming an increasingly more popular alternative to bankruptcy. Debt agreements are a less drastic option than bankruptcy and have many benefits, such as:
- The interest on your debt is frozen.
- You are able to retain your assets
- The negative effects on your credit rating are significantly less severe.
Debt agreements are available to debtors with under $106,561.00 of personal debt and net income below $79,920.75, if you fall into this category you should take the debt agreement option into consideration.
For people inexperienced with financial matters it can always help to get an informed opinion. For lower income earners who are facing financial problems financial counsellors can provide low cost or free advice to assist you with you situation. Financial counsellors are generally experienced in the areas of debt and financial crisis. Financial counsellors can provide invaluable assistance if you are considering bankruptcy as it always helps to have a second opinion.
Among the things financial counsellors can assist you with are debt negotiation, budgeting, informal agreements and debt agreements. They can also help you decide if bankruptcy is the best option for you.
Another possible alternative to bankruptcy is debt negotiation. Debt negotiation is a negotiated arrangement between you and your creditors agreeing on a reduced debt level in exchange for an immediate finalising of your debts.
Through negotiation it is possibly to arrange a reduced debt level that is mutually beneficial for you and your creditors. In exchange for an immediate lump sum payment it is possible to have the total of your debt reduced significantly. Creditors will often accept these arrangements as accepting a reduced amount now is often more profitable that spending months chasing you for the total amount of the debt. Creditors also will often acknowledge that a reduced amount is all you can legitimately afford to pay.
Debt consolidation is the process of taking all your high interest debt and consolidating it into one low interest loan. The benefit of this is that you have only a single payment to meet each month which is subject to a single interest rate. It can be extremely difficult to manage multiple debts with multiple interest rates, with debt consolidation it is possible to significantly reduce your debt troubles. Debt consolidation could possibly even halve your interest liability in one facility and give you a finite timeframe in which to pay off all your debts. Debt consolidation can get rid of your multiple creditors and replaces them with a single debt managed by the lender, this makes debt management much easier.
Before entering into bankruptcy you should always consider the alternatives available to you as bankruptcy should only be considered as a last option. Before making a decision of that magnitude it is always recommended that you seek expert advice to explore the options available to you.
If you would like to find out the most effective solution to reduce your debt then fill in the following form or call Debt Relief on 1300 781 034 8am - 8pm 7 days a week and our staff will assist you.