Five Bankruptcy Alternatives

Eliminate Debt Without Declaring Bankruptcy

Mar 14, 2010
Katrina Dayrit

Eliminate Debt Through Bankruptcy Alternatives - Alan Cleaver

Whenever declaring bankruptcy is an option to eliminate debt, there are almost always alternative credit solutions available.

Declaring bankruptcy, whether in personal investments or in business, is not a procedure that's life-ending. Sure, there are financial limitations placed upon those who declare it, assets are lost and debts are restructured, but in the end it is something that can be recovered from. However, to many people, going through this process seems to be the end of their financial road. That notion could be based on the seemingly eternal financial illiteracy that many people seem to suffer from, or it could be influenced by the somewhat strange notions many people have about declaring bankruptcy and investment failures.

While declaring bankruptcy certainly is not the end of any story, it is not the ideal outcome for any business. Before declaring bankruptcy as a way to eliminate debts, it is wise to look at alternative credit solutions.

#1: Debt Consolidation

Debt consolidation is among the most popular credit solutions available. It involves relatively simple process that can ease the amount of debts that need to be paid, the process of paying those debts, and the interest rates that they operate on. By taking out a loan through a bank or specialist debt consolidation service, people can simplify the entire process by paying installments to only one debt. This is especially useful for people who are paying to several lenders at once and want to ease the process.

#2: Direct Negotiation

There are times when debtors just can't make a payment, and need to strategically work out credit solutions for their specific problems. Missing payments can have massive secondary effects, from ruined credit scores to crushed businesses. It is best to avoid any dodged payments and focus on directly speaking with lenders. For many people, negotiating a payment plan with the bank will save a lot of time and stress, making the entire process of trying to eliminate debt simpler.

#3: Do Nothing

This can often, strangely enough, be among the best credit solutions for debtors that are in dire financial straits. For those who are trying to eliminate debt but have relatively few assets that can be surrendered to lenders, the best solution is sometimes to simply quit paying. In many jurisdictions, debts are waived from people's credit history after seven years, leaving them relatively free of worry afterward. However, this is an absolutely final option. Explore every other possibility before using this as the solution for it is definitely not among the simpler bankruptcy alternatives.

#4: Debt Restructuring

For people who are in a particularly bad spot but still want to continue their business, debt restructuring might be the best option among all the available credit solutions. By directly negotiating with their creditors, it might be possible to change their payment options or debt levels. This allows people to continue their business without being struck down by the burden of endless debt and financial concern.

#5: Strict Financial Discipline

While all other major bankruptcy alternatives work by reshaping the debt, or occasionally avoiding it altogether, this is one of the credit solutions that takes a more direct and stoic approach. The easiest way for people to eliminate debt is by completely cutting out any unnecessary costs from their lives. Whether that means eliminating luxury costs or selling assets, the decision is the same. People can minimize their personal spending, radically change the way they try to eliminate debt, and completely remove any unnecessary costs from their personal lives.

From restructured loans to direct negotiation, these five credit solutions can help anyone eliminate debt while avoid the taxing procedures of court and focus on running (or recovering) their businesses.