Wednesday, June 20, 2007
Mevish Jaffer
Debt! Many people are in it and are searching for a way out of it. Are you one of them? Well if so, filing for bankruptcy must have crossed your mind a time or two. If you’re like most people, you probably also feel that filing for bankruptcy is an easy solution to your debt and credit-related problems, however you don’t have to let your financial status come to that.
Bankruptcy Repercussions
There are other ways to reach debt settlement without resorting to bankruptcy that will still allow you to retain a good credit score. You also need to keep in mind that filing for bankruptcy will remain on your credit report for up to 7 years or longer. As a result, lenders are also less likely to approve a loan for someone who has declared bankruptcy in the last two years of their application. Additionally, if you do manage to get approved, you have a greater chance to receive significantly higher interest rates attached to your loan. Aside from the havoc bankruptcy can reek on your credit score, it can also affect your personal life negatively by adding extra stress to your marriage or relationship.
Prevention – Take Some Action
Now that we’ve established how detrimental filing for bankruptcy can be to both your professional and personal life, you probably want to know if there are any ways you can avoid it all together. Fortunately, there are certain steps you can take to prevent having to file for bankruptcy. These include:
- Ask the experts for help
- Negotiate with creditors
- Address any debt problems as early as possible
- Maintain a budget within your means
When in doubt, ask for help! Experts in every field exist for a reason, including credit and debt counselors. An added perk to conferring with credit counseling management providers is the fact that most of them offer a complimentary consultation. They can help you identify ways to repay debt on your own without having to declare bankruptcy.
There are also some preconceived notions about how filing for bankruptcy allows an individual to make a fresh start on their credit. This of course is a complete myth! We have already covered the fact that it puts a huge damper on your credit score for one thing. On a brighter note, you can try discussing your financial difficulties with creditors in an attempt to negotiate lower monthly payments. For example, you may be able to work out a way to make less than minimum payment amounts for a short period of time.
More often than not, simply identifying your debt problems early on can prevent you from having to file for bankruptcy later on. One way to ensure you will be able to spot any financial problems is to create a monthly budget report for yourself. You can always refer back to it in an effort to detect any potential financial trouble spots and nip them in the bud before they get out of control.
One of the hardest things to do, which is staying on a budget is also one of the most effective ways to avoid bankruptcy. It’s no surprise that people have a hard time sticking to a budget; however this small sacrifice allows you to maintain a lifetime of good credit. It’s okay to splurge every once in a while, however most of the time, you have to be careful and limit your credit card purchases to necessities only in order to avoid piling on a mountain of unwanted debt.
