Avoid Declaring Bankruptcy With These Alternatives
Personal bankruptcy is a large step for anyone in a financial crisis. The implications impact all aspects of your life and credit history. Even if you can find your way back to solvency quickly, you will have a tarnished credit reputation for up to seven years. Therefore bankruptcy, should only be a last resort after all other avenues have been exhausted. Here are several possible ways to avoid declaring bankruptcy.
Apply For a Bad Credit Loan
Check out a bad credit loan before the collection agencies start hounding you. If you meet certain criteria, you can receive a bad credit loan to pay off outstanding debts. This option means paying off one debt with another, so make sure you have a method of income to pay down the new debt, otherwise you’ll end up right back where you started.
- Great if you are behind with a few bills and just need some quick cash to get through in a pinch
- If you have a regular pay cheque, you can pay it back quickly
- If you have severe credit problems, you may not qualify
- You have to pay off the new debt, which can lead to bigger problems if you stack your debts
One of the best ways to avoid bankruptcy is preventative action, before you begin missing payments. So if you have sufficient credit, you may qualify for a debt consolidation loan to take care of loans that are beginning to get out of hand.
- This type of loan particularly helps if you are paying high interest rates on overdue credit card bills. The loan will combine the bills into a single, lower interest loan
- The loan doesn’t negatively influence your credit rating
- This type of loan can’t be used to pay back mortgages or car payments
- If you already have a bad credit rating, you may not qualify
- If you can’t keep up with the payments of this loan, this route will just make your problem worse.
A debt management plan allows you to come to an arrangement with your creditors to pay back loans over a longer time period. It is negotiated with the help of a credit counseling agency that will charge you a fee for the service.
- If you have a regular pay cheque, the plan will stipulate that you will pay back your loans on a schedule that is easier for you to manage.
- Creditors are not forced to agree to the terms. This means that if some creditors agree to the plan and others don’t, you could continue to be harassed by collection agencies
- If you don’t continue to pay back the loans according to the debt management plan, you will go right back to where you started
- The arrangement will appear on your credit rating
A Consumer Proposal
Like a debt management plan, this is an arrangement with your creditors made through a trustee.
- If the creditors who are owed the majority of the funds agree to the proposal, all creditors are forced to agree
- You may only have to pay back a portion of your debt
- The plan typically only lasts three years
- Your assets won’t be sold
- If the proposal is agreed upon, collection agencies will stop calling
- Your creditors may not accept the proposal
If you are having short-term money problems look to Magical Credit. We approve cash loans from $2,000 to $10,000, based on your current government-based income. Once you’re approved for an instant loan, the funds will be deposited directly into your bank account for you to spend however you wish.