Filing bankruptcy is always referred to as the last ditch option that one should seek for when all other options are exhausted. When you file it, you do maximum damage to your credit score, your social status and your professional credibility. There are several other debt relief methods that you can follow to avoid filing bankruptcy. Debt settlement, debt consolidation programs and debt management plans are traditional ways to help you give debt relief. Cash refinance from house equity and short sales may also help you out and show you another path. The very word BK (bankruptcy) stays on the credit report for 7 to 10 years. So long it is there, your credit score cannot improve.
Enrolling in debt relief program you can find several customized ways to eliminate or reduce your debt. These are viable alternatives to bankruptcy. It is true that you cannot totally discharge your debt like you can with chapter 7. But, you can slash substantial amount locked in interest and late payment penalty. You could get newly arranged payment scheme and pay through long term installments. This will lower your monthly payment pressure and ensure that you can get rid of debt within 1 year to 5 years. Debt settlement program takes 1 year to 3 years to finish while debt consolidation takes 3 to 5 years. Bankruptcy chapter 13 resembles debt consolidation in some ways. But, debt consolidation works in consultation with your creditors while bankruptcy procedure is conducted by court administrated trustee.
If you are running short of cash and on the verge of bankruptcy, do not take any hasty decision immediately. If your house or real estate enjoys good market value, you can pull out some liquid money from your house equity and utilize it to pay off debt. It can save you from filing bankruptcy and prevent your asset from getting liquidated.
Short sale of home is another well known method by which you sell your house in less than what is owed. By selling the house in less value both you and your lender incur loss. But the proceeds are used to pay off the debt. It is accepted by both parties considering the uncertainties of bankruptcy procedure. This way you can also avoid bankruptcy.
About the Guest Author: Angela Sanders is the Financial Writer since 2003. She manages the contents of many financial sites. Currently, she is working as financial advisor for one of the largest MNC in Carson City, Nevada. Some of her blogs and articles can be found at A Financial Journal |