How do I Avoid Bankruptcy?
Bankruptcy has many serious consequences and may not be the best option. If your debt problem has not gone too far then you may be able to avoid bankruptcy through a different debt solution. Whatever your situation, to stand the best chance of avoiding bankruptcy the message is simple:
Get Bankruptcy Advice as soon as possible!
If you wish to ask Piggy about how to avoid bankruptcy then please feel free to ask him (ask piggy).
Note: If a creditor has filed a petition against you it may still be possible to avoid bankruptcy. Seek advice, you must act quick!
See Bankruptcy advice.
By seeking advice as early as possible, financial difficulties stand the best chance of being resolved. There are a number of ways to avoid bankruptcy depending on your circumstances. Solutions include:
- Individual Voluntary Arrangement (IVA)
- Loan Consolidation
- Income Maximisation
- Debt Management Plan
Loan Consolidation
Loan consolidation may help you to avoid bankruptcy. If you have built up an adverse credit history then you may not qualify for an unsecured loan and your only option may be a secured loan. Through loan consolidation you may be able to restructure your finances to reduce your total outgoings. The goal will be to start living within your means, continue to repay your debt and avoid bankruptcy.
Loan consolidation should not be taken likely. If you do not keep up repayments on your loans then you risk losing your house.
Avoid Bankruptcy through an IVA
An IVA is a legally binding agreement between your creditors and you to repay a just percentage of the debt over a period of time (usually 5 years). After the 5 years, you will be completely debt free. (See Piggy's IVA Centre).
Not only will you avoid bankruptcy, you will also be able to keep your house. The downside is that your credit rating will be severely damaged for six years. You will also have to repay all you can for the 5 year period.
Avoiding through income maximisation
Income maximisation is not a financial product, it is good financial management that may help you to avoid bankruptcy.
Avoiding bankruptcy may be possible by maximising your income and reducing your outgoings to a minimum. This may have the effect of bringing you back within your budget. Examples include a consolidation loan to reduce your financial repayments, switching service providers to reduce bills and increasing your income. See Income Maximisation
Avoid bankruptcy through a Debt Management Plan
This is an informal arrangement between your creditor(s) and yourself where they will accept reduced repayments. The danger with this type of solution is that it is non-legally binding and the lender can request payment at any time, even if they have agreed to only receive a percentage.
A DMP will not formally reduce the amount that you have to repay. Further to this, interest may not be frozen and charges may continue to be added. Defaults will also continue to be added to your credit file. This will seriously affect your credit rating, although it will give you more time to repay.
Avoid Making it Worse!
A common mistake many people make is to bury their heads in the sand. Regardless of the causes of debt, bankruptcy advice can be sought in a confidential capacity and should give you the best course of action. No professional advisor will be able to help you avoid bankruptcy if matters have gone too far so act as quickly as possible.
What if bankruptcy can't be avoided?
If, following professional advice, you have decided that bankruptcy cannot be avoided try not to worry. As Piggy Bankrupt describes through his bankruptcy blog organisations will still be able to help you through the process. It will help you to know what to expect, how to prepare and what challenges you will face during and after bankruptcy.
