Though it sounds like an easy and attractive solution for one's financial problems, bankruptcy should be the last option any individual should resort to. It can cause enormous damage, not only to the individual's credit report, but also to his or her social standing and reputation.
There are quite a few alternatives to filing for bankruptcy.
Negotiating with the creditors is one of the alternatives. Creditors know that the reason an individual files for bankruptcy is due to his or her inability to pay off excessive debt. Instead of risking losing everything in a bankruptcy case, most creditors would be more than willing to negotiate in order to recover at least a portion of what the individual owes them. Another advantage of negotiation is that it will also buy the individual some time to allow him to rebuild his finances.
Debt consolidation is another alternative. This method consists of the debtor borrowing one low interest loan from a lender, typically a bank, to pay off other high interest debts like credit cards, for example. This allows him to replace multiple high interest loans with a single low interest loan. This makes the debt easier to repay since the debtor only has to make one payment. Also, since the loan is a low interest one, it is possible for the debtor to pay it back faster by applying more of his monthly payment against the principal of the loan.
The best alternative by far is smart money management. The reason people fall into debt is because they spend more than they earn. The most logical solution would be to reduce monthly expenditure to set aside more money to pay off one?s debts. Budgeting your money and constantly finding ways, sometimes innovative ones, to reduce your monthly expenses is the best way to repay all your debts without having to file for bankruptcy.
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