If your business is financially bind, paying the monthly dues can be difficult. That is why the first thing that pops up in the mind of business owners is to declare financial failure or bankruptcy. Filing for bankruptcy is not the sole option to resolve insolvency because there are other alternatives available. Though bankruptcy can provide financial relief, but before making your decision you should first try to study other alternatives.
Talk to Your Creditors
Calling your creditors and discussing the problem with them can be intimidating, but it should be the first thing that you should do if your business is facing financial issues. Your creditor can offer other payment options that can alleviate the difficulty of repaying your debts. Most creditors are not favorable to bankruptcy that is why they instead offer a plan that will be beneficial to both parties.
Looking for a credit counseling firm can also help in determining the right way or alternative that can help you in resolving the insolvency. The agency will be the one to contact your creditors and discuss a repayment option based on the salary of the filer and the debt. Likewise, the agency will distribute the payment to the creditors until the debt is repaid completely. However, you need to be careful in finding the best credit-counseling agency particularly in terms of fees.
Debt consolidation is one of the effective alternatives for bankruptcy. This option allows borrowing money from a financing company and use the money for repaying debts from different creditors. This may sound strange, but many business owners facing financial trouble are using this method to solve the insolvency.
The concept of debt consolidation allows you to repay few debts while borrowing for one larger debt. The good thing about this alternative is that you can apply for debt consolidation loan from a bank in a lower interest rate and use the money repaying for few debts carrying higher interest rates. If you will use your home as collateral, the interest rate of the debt consolidation loan is even lower.
However, before considering for debt consolidation makes sure that it will work to your financial needs. You should consider this alternative only if you have several debts that have higher interest rate such as finance company loans and credit cards. You can qualify for debt consolidation loan if you can prove to the lender that you are employed and have good job. Likewise, you should also prove that your income is more than enough to repay the loan.
Another alternative for bankruptcy is to default your debts. This means that if you do not have any exemptions in terms of income or property, the creditors can take nothing from you. Likewise, the Fair Debt Collection Practices Act, the creditors cannot harass or force the debtor to repay. However, the disadvantage of debt default is that it remains on your credit history for several years that eventually may affect your credit rating.
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Therefore, if you are facing tough time in your finances, you should consider getting advise from an expert bankruptcy lawyer.