Money Divide .com

You can avoid bankruptcy

// December 15th, 2009 // Debt

It is certainly desirable to avoid bankruptcy if at all possible, given the restrictions placed on a person who has been made bankrupt, although in certain cases it may be the best option. What are the alternatives? Advice should always be sought from charitable organisations that specialise in debt help; they may be able to negotiate reduced payments to your creditors, if there is no realistic possibility of being able to pay the debts off in full.

If the person owns a house with sufficient equity, re-mortgaging may be a possibility, although this should only be done after careful consideration, and with independent, professional advice. The money will still be owed, but to a different company, and the debtor will need to be sure that they can meet the increased repayments. If not, you run the risk of losing your home and all of the possessions contained within it.

The third alternative is not one that I would normally advise, as it has the potential to ruin relationships. Friends or family may be willing to lend money to help out, although this should be treated as any other financial deal, and not as an easy way of getting out of a difficult situation. Such an arrangement should only be made with repayment terms clearly laid out, and if the ‘borrower’  can be certain that they can adhere to the agreement.

The fourth alternative is a simple way to avoid bankruptcy. Do not get into debt in the first place! Although some people find themselves in trouble because of circumstances, for example, divorce or job loss, it is always wise to plan for contingencies, and to live within your means. Try and keep your spending to a reasonable level and try not to buy things you cannot truly afford. Instead, put money aside to save up for that ‘must have’ item!