Avoid Going Bankrupt with Some Bankruptcy Alternatives
If you’re in a situation where you can no longer afford to keep up with your repayments and you’ve fallen so far behind you feel there’s no hope, bankruptcy might begin to look like an attractive option.
However, it’s best to avoid going bankrupt wherever possible. There are some long term negative ramifications to declaring bankruptcy that you might regret later. A bankruptcy listing on your credit file could potentially stay there for up to 7 years. This can make applying for any kind of credit in the future very difficult.
Before you think about filing for bankruptcy, consider what other avenues are open to you.
Call Your Creditors
Don’t ignore the people you owe money to. Pick up the phone and call your bank, lender or other creditors and let them know about your financial hardship. Ask them to help you arrange payment plans so you can begin to get back in control of your financial situation.
Your creditors will want to know what you’re doing to honour the terms and conditions you agreed to when you took out your loan or credit card, so be prepared to answer honestly what steps you’re taking to work on improving your financial situation.
In order to avoid going bankrupt, you may be able to apply for a hardship application through the Uniform Consumer Credit Code. If you can prove your insolvency is temporary and you can show how receiving an alteration of your loan terms with your lender can help you, it may keep you out of bankruptcy.
If you’ve lost your job or your income situation has changed significantly, it’s very easy to fall behind on your payment responsibilities. Instead of thinking about the ‘easy’ option of going bankrupt, consider restructuring your finances before they get out of hand.
This could include trying to find ways to consolidate debts, transfer balances to lower interest options, and looking for ways to reduce your monthly repayment commitments. If you can, try to sell off any unwanted items to help raise a little cash to help clear some of those overdue payments. You should also immediately begin working on ways to improve your income any way you can.
Debt Agreement – Part IX Bankruptcy Act
If all else fails, try to reach a formal agreement with your creditors where you offer them a settlement figure. This can help lock in the amount of debt you owe now and potentially stop further penalty fees or interest from being added. You will need to honour the new payment arrangements to repay the amount you’ve agreed to or you could find yourself in more trouble later.
Ask for Help
If all else fails and you don’t know what to try next, always be sure to contact a community based counselling services, such as Centrelink, St. Vincent de Paul, Salvation Army or your local Legal Aid office.