When you are dealing with too much debt to handle, sometimes the most reliable option available may be bankruptcy. In many cases, bankruptcy will give you a completely blank slate, using all your assets to pay off all your debts. However, it can also tank your credit, putting you in a financially disadvantageous position for some time to come. However, bankruptcy is not your only option. Here are some other solutions you should consider.
Restructure your loans
If you have a lot of debts and some of them come with much higher interest rates than others, then there may be a way to shuffle them around to your benefit. Debt consolidation involves moving multiple debts to a single debtor. Not only can it curb the stress of being chased by several at once, but it can also put a cap on and reduce some of the higher interest rates out there.
Ask creditors for their help
Talking to your creditors while deep in debt might sound like the thing furthest from your mind, but believe it or not, they may able to help you. Most creditors do not want to have to spend money on collectors and get rough with their borrowers. You may be able to get them to agree to extend the loan, to cap that interest on it, or even to accept a lump-sum payment to discharge the rest of the debt. The sooner you get in touch and let them know you are in risk of bankruptcy, the more they might be able to do to help you out.
Try to freeze your debts
An individual voluntary program is one of the most effective alternatives to bankruptcy. An IVA is a legally binding contract between you and your credit, freezing the debt in place and restructuring the loan so that you’re better able to pay it back. Aside from ensuring the creditors that they are more likely to get the full sum of the loan that they are offered, it also legally blocks them from taking any action against you unless you break the terms of the IVA. As such, it can offer a lot of stress relief and prevent you from falling into bankruptcy.
Sell your assets
If you’re able to pay your debt off within the bounds of your existing agreement, then you should do it by any means. If there are some measures you haven’t already taken, such as selling your existing assets, then it’s better to do that now than later, when the debt has grown. Selling your assets can free up cash so that you can get ahead of the debt, giving you more time to plan, or give you enough money to negotiate a final and full payment with your creditors.
In some cases, bankruptcy may be your only option and, if so, it’s usually better to rip that band-aid off while you still have some assets to help you settle. However, make sure you consider all your other options first.