In case of unpayable debts, it is essential for a company to explore other options, instead of just filing for bankruptcy. This is important, so that one can avoid the demerits of bankruptcy and explore possible opportunities for debt settlement. It is crucial to understand every debt case separately, as complexities of each settlement process may vary significantly. The cost of bankruptcy is very high, therefore, let us take a look at some alternatives that may help you avoid it.
Debt Consolidated Loans
One of the most effective ways to play safe and reduce chances of bankruptcy is debt consolidation. In this procedure, all your debts are combined together under one category to make the repayment process more simple and less stressful. You'll be expected to pay only a fixed amount of installment at the end of every month. Hence, slowly and gradually you'll be able to get rid of the debt. Some of the demerits associated with this alternative is that, it is a time-consuming process. Moreover, getting consolidated loans may not be an easy process, as it requires one to have a very good credit score.
Debt Settlement Programs
There are many debt settlement companies that can help you in reducing the owed debt to consumers. However, you have to carefully choose a firm that is authentic, and doesn't demand a huge sum of money for helping you in the process. Generally, this is one of the best alternatives for businesses going bankrupt, as large corporate houses have resources and funds to approach big debt settlement firms.
Individual Voluntary Agreement
Through this program, an individual voluntary agreement can be signed with each of your creditors, that will help you pay your debts within a specific time period (generally 6 to 7 years), and through some fixed monthly installments. It is certainly a better alternative for individuals who're dealing with personal debts.
Budgeting stands out as one of the slowest, but considerably effective process to manage debt. It is undoubtedly one of the most important things that needs to be acted on while making plans for repayment. Most tend to avoid budgeting because there are always other more severe problems around to take care of. But they fail to understand that money management leads to efficiency, which in turn promotes growth.
Consumer Credit Counseling Services (CCCS)
There are several companies that provide effective debt management tips. In the United States, the two main authorities, the National Foundation for Credit Counseling (NFCC) and the Association of Independent Consumer Credit Agencies (AICCA) provide effective credit counseling.
Use Your Negotiation Skills
It is one of the simplest ways to avoid bankruptcy and have debt relief. Although your creditors may not be easy to deal with, you can openly talk to them and request for some time for repayment. You can also inform your creditors about your budget plans, and other ways through which you're trying to improve your situation.
Ask for Help
If you're really close to some of your friends or relatives who are financial strong, you can ask for their help. However, ensure that you have a plan to repay their money within a stipulated amount of time, as you wouldn't want to spoil your relationship with them.
People in debt must ensure that they look into these methods before filing for bankruptcy, as these methods may prove to be an important step towards solvency.