If you are having financial difficulties and are considering filing bankruptcy, it is wise of you to try to avoid bankruptcy. Declaring bankruptcy can destroy your credit. And although there are many times where consumers have bounced back after declaring bankruptcy, bankruptcy stays on your report for 7 (Chapter 13) to 10 (Chapter 7) years and on your public records for 20 years. So what are your options?
Well, it depends on the type of debt, state laws and if your lenders will work with you. If your lenders are willing to work with you and owe over $10,000, then debt settlement or payment plans are options. If your credit is still worthy, or you have available equity in your assets, you may be able to qualify for a debt consolidation loan which can lower your monthly payments on your debt. Buy, by all means, trying to avoid bankruptcy is the best answer to your difficult situation.
With debt settlement or payment plan options, you can negotiate with the lender so that you can afford to continue to pay principal and interest on the outstanding debt. The options that can be taken with a debt settlement agreement is that the lender will adjust the outstanding principal and take an immediate partial loss rather than take a full loss which is what would likely happen in a bankruptcy. Or you may be able to negotiate a lower payment on the outstanding debt with a payment schedule that fits your budget. In this case, the lender can reduce the interest rate or extend the term of the outstanding debt, therefore reducing the payment.
With a debt consolidation loan, what is essentially happening is, a lender is giving you a loan that will pay off multiple debts over what probably is a longer period of time. Usually these debt consolidation loans use some form of collateral, which secures them in case there is a future bankruptcy filing. The terms or length of the debt consolidation loans are usually 10 to 20 years, with an interest rate that is depending on your credit score.
By trying to avoid bankruptcy, you have the opportunity to keep your credit from reflecting a huge blemish. By declaring bankruptcy, not only will your credit be affected but you will have a mark on your public record which can work against you, along with not having the ability to finance a car, get a credit card or mortgage a house in the future. It is best to work with your lenders to try to negotiate the best option where they get paid back, and you
