Consider Your Alternatives
The most essential consideration is whether or not bankruptcy is your only option. It is always preferable to explore alternative debt management options prior to filing. Repaying your debts in full is the most effective method for protecting your credit and securing credit in the future. Before declaring bankruptcy, attempt to negotiate a payment plan that fits your budget with your creditors. Many lenders are willing to work with you to recover the loaned funds, rather than risk losing the opportunity to do so through Chapter 7.
In order to resolve your debts, you may be able to negotiate a lower interest rate or principal amount. Additionally, mortgage lenders offer methods to reduce your monthly mortgage payment while you catch up. There are a variety of mortgage loan modifications that lenders may consent to in an effort to prevent foreclosure. When a home falls into foreclosure, the lender may be willing to reduce your interest rate, extend the term of your loan, waive delinquency fees, or temporarily suspend your payments.
For many individuals, bankruptcy is the only alternative. There are times in life when unforeseen circumstances place us in protracted financial hardship. You may have experienced the loss of a job, a spouse, or a serious medical condition that has put you in a financial bind. Bankruptcy is the only option for those who cannot afford to continue making payments, let alone catch up on delayed payments. You can eliminate most, if not all, of your debts and regain financial control through bankruptcy protection. There are a number of indicators that can help you determine whether your financial situation has left you with few options.
Watch For Indications
Multiple missed payments are the earliest sign of financial difficulty. After missing two or more payments, your credit is likely to be negatively affected. At this juncture, creditors will begin calling and attempting to collect on the debt. For secured debts, your assets are subject to seizure and sale. Secured debts, such as mortgage loans, auto loans, and payday loans, put you at risk of losing your income or property. When declaring bankruptcy, your wages and the majority of your assets are protected from creditors.
When you begin to take out additional credit to pay off other debts, you may also be close to declaring bankruptcy. There are numerous lenders that provide modest personal loans that can be used for bill payment. The issue with these loans is that they frequently use one or more of your assets as collateral, putting these assets at risk if you fail to repay the loan. Typical of these loans is a high interest rate that will keep you in debt for years. In general, it is never a good idea to incur additional debt to repay existing debts. This practice indicates that your debt exceeds your income. You can eliminate almost all of your debts through bankruptcy, putting you on the path to financial stability.
People frequently make the error of using their savings or retirement funds to pay off their debts. There are instances when it is beneficial to use a small portion of these funds to repay a debt, but problems arise when this becomes a habit. Currently, the workforce is growing due to an aging population that finds itself working full time rather than savoring retirement. Not only must so many retirees work to make ends meet, but they must also continue making payments on debts they accrued years ago. When medical bills begin to accumulate and income is low, many hardworking individuals are forced to file for bankruptcy protection.
Those who have fallen on hard times have the opportunity to regain control of their financial destiny thanks to bankruptcy. It can be a useful tool that helps numerous people each year get out of debt and get their lives back on track. The first step toward achieving financial independence is understanding how to assess your financial situation, consider all of your options, and make an informed decision.
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