5 Tips and Strategies to Avoid Filing for Bankruptcy – Part 1
Bankruptcy. Easily one of the most dreaded words in the financial world, yet there is not a day that we don’t hear about it in the news when a company has to close or stories like that. In turn, we just all wish that if we ever start our own company and get a series of personal loans to finance it, that we never have to go through something like it, since going bankrupt always spells disaster for anyone’s financial life.
In fact, according to several financial experts and gurus, bankruptcy can be one of the top five life-altering negative events anyone can experience during life, just as serious and stressing as divorce, illness, disability and for some, it is equivalent to even losing someone they love. Even more serious can be the damaging psychological effects that this event can have over the affected people, leading them in many cases to never apply for a personal loan again or to try starting another business.
In the United States, bankruptcies were abound in the past few years, and even more so after the economic crisis, with almost 1.5 million filings under different chapters before the end of 2011. The reasons for filing for it might be varied and even controversial in some cases, but one thing is certain: In all cases it means complete legal and financial insolvency.
However, despite being really devastating, bankruptcy also suffers from several myths and beliefs that are not always true, like the myth that only finically irresponsible people who owes a lot in personal loans file for it.
If you ever were or are in a case where you might be considering bankruptcy, here we offer you five different preventive measures that you can use to avoid bankruptcy.
1. Negotiate/re-negotiate your personal loan debts
One of the most common types of bankruptcies is Chapter 7 bankruptcy, which is in short, a liquidation in which former business owners say goodbye to all their personal loan and other debt, with many of the people affected sometimes even losing their assets or properties. To avoid this kind of filing, there are ways like debt consolidation that allow you to still keep your money and even manage to pay back your lenders.
Debt consolidation is an special financial arrangement where lenders allow you to repay most of your your debts and personal loans without you having to lose any of your properties. What you have to do in this scenario is to consolidate all your debts and personal loans into a single amount with just one monthly payment at an interest rate that is lower than the rest of the market.
In similar fashion debt settlement also means a kind of negotiation with your banks and creditors. In it, it is highly likely they will get some of their money back thanks to implementing reduced payment plans. The key to this approach is flexibility, since you will need to make smaller payments now and larger payments down the road or the other way around depending on your financial status. This will help you remain in control of your finances until your debt and personal loans are paid, instead of having to file for bankruptcy.
2. Sell only your property
As we mentioned above, a chapter 7 bankruptcy implies that you have zero repayment ability, which can be severely damaging for your credit, Thankfully, you can avoid this situation altogether by selling some of your properties or assets before the first financial problems start to surface.
Even if the amount you get from these sales is only minimal, it ill definitely be a lot better than having no cash at all to repay your personal loans and debts, and will definitely give you a nice push towards avoiding a bankruptcy filing.
Come back for our next entry to find out about the remaining three tips and strategies to avoid bankruptcy.