If you are experiencing a major burden when it comes to your debts, you will surely consider filing for bankruptcy as the ideal option you have in order to get out of debt. But in reality, you should not consider bankruptcy as your initial choice, but the last option. If you are wondering if you can avoid bankruptcy with the utilization of debt management strategies as well as get into the right financial track.
The answer is yes. When filing for a personal bankruptcy, you have to bear in mind that you might not be able to avoid all of your debts. For individuals that have a regular income, the court usually establishes a repayment plan under the Chapter 13 bankruptcy. With this plan, it is quite similar to a plan where you can set-up yourself by working along with the lenders. Why should you file for bankruptcy, if you are not required to and you can even pay back your creditors without it?
Negotiate with your lenders
It is best to talk with your lenders and work out a plan. You can start with your secured lenders such as mortgage and car lenders in order to keep your home and vehicles if possible. You have to leave your unsecured creditors until last, or perhaps consolidate the smaller debts – such as credit card and fast loan debts – so it becomes easier to keep track. It is also best to check out some of the free websites that offer debt snowball software that can help you establish a sample repayment plan on your own.
Nevertheless, if you are not working, this is the case where you might consider filing for bankruptcy. Remember that without a job, you cannot easily pay back your debt, thus you need to file for the Chapter 7 bankruptcy so that you will be allowed to discharge all your debts. It simply means that you are also required to sell your property or vehicles, depending on the state where you are residing. Prior to filing though, and even if you do not have a steady income stream, it is still possible to discuss how to pay back your lenders, since they do not want to see you discharge debts in bankruptcy either. You can try to acquire a temporary hold on payments until you can find work again.
Debt management plans
If you are creating a debt management plan, you should start with your house, food and utilities in order to be supported. The moment that the amount is taken care of, you can try to make payments on the caveat loans so that you can have a hold on your home and vehicles if you need them. Lastly, once you have taken care of them, it is time to consider paying back all your unsecured creditors, who are probably credit card companies.
If all of these options fail, you have no other choice but to file for personal bankruptcy. Just make sure that it will be left as the last option. Try to stick with the payment plan and eventually make larger payments the moment you are working steadily or have an additional source of income.