Financially hard times call for financial assistance from institutions that are willing to lend a helping hand. Assistance in the form of financing instruments, however, do not come free. They often come with interest rates that may put even more stress on you already tight financial situation. When times get harder, you might not have much recourse but to take the legal option to clear your debt by filing for bankruptcy. There are times, however, when bankruptcy alternatives may still be availed of to preserve your assets.
Bankruptcy is a legal proceeding wherein you can stop your creditors for collecting additional loan repayments. There are several types of bankruptcy proceedings that apply to individuals and private corporations. There are provisions in the bankruptcy act that illustrates the kinds of bankruptcies that can be filed for. Chapter 7 involves liquidation proceedings wherein a certain amount of assets are preserved and the rest are surrendered to the bankruptcy trustee to be sold to come up with funds to pay lenders. Filing for Chapter 11 bankruptcy applies to businesses or individuals with a collective debt obligation while Chapter 12 applies to impoverished farmers. Chapter 13 bankruptcy is perhaps the most common as this is the one that applies to individuals who want to organize their debt obligations. This type of bankruptcy is more like a loan restructuring program.
Filing for bankruptcy can definitely mar your credit record and strip you of your assets. Depending on the type of bankruptcy you are filing for, you may still need to pay a certain amount to your creditors even after filing for bankruptcy. The important thing for you to know is your bankruptcy alternatives. You have to consider these alternatives carefully to be able to salvage part of your assets and your credit rating. Check out your bankruptcy alternatives before signing up for bankruptcy.
If you have no wages nor property that may be put at risk, one of the bankruptcy alternatives would be to do nothing. Because there is nothing that you possess that your creditors can claim to cover your unpaid debt, your creditors will most likely just write your loan off. When they strike your record off their books would be at their discretion. Your loan delinquency record may be kept alive for quite a number of years during which will most likely receive persistent collection letters and phone calls that badger you to resume payments. Additional penalties will also be charged on your delinquent account making your loan amount multiply. However high this amount goes, if you have absolutely nothing to pay it with, it can get written off by your lender.
Bankruptcy alternatives also include negotiating with your lender and loan restructuring. By negotiating with your lender, you can keep your assets and buy time for you to pay off your debt. Financial institutions are actually more concerned about getting their money and not your property. Negotiate with your creditor by expressing intent to resume payments as soon as your cash flow would permit. Loan restructuring, on the other hand, involves the reissuing of your loan balance and arrears in a new loan. Restructuring as a bankruptcy alternative is a less expensive option.