So you’re contemplating bankruptcy. Whatever the journey that’s brought you here, it’s time to recognize it’s a significant step. Bankruptcy can be a saving move, or a difficult one, depending on how it’s used.
Let’s start with the benefits. When you declare bankruptcy, creditors cannot continue to pursue you in any way, your financial stress will likely go down immediately, and some one else steps in to help. These are all benefits, but what about the costs of bankruptcy.
The costs include the significantly negative impact on your credit rating (that can last for several years), and you lose all access to your assets. These should not be taken lightly, and all of the alternatives should be considered first.
Financial counselling is often available at low cost, often even for free, to help you learn more about how to better manage your finances. Financial counselling is a definite option, and almost a certain necessity for any one seriously considering filing for bankruptcy. In fact, financial counsellors are equipped and trained to help you determine whether bankruptcy is actually the right option for you or not, making them an essential part of the debt recovery process.
Debt consolidation is a financial option wherein all of your personal debts are united into one larger debt. They can save on interest rates and help by setting a concrete plan for repayment (complete with terms, so you can see the light at the end of the proverbial tunnel).
As the name suggests, debt agreements are made between the debtor and the person in debt to freeze interest on a debt temporarily to allow payoff of the debt. It does still impact your credit rating negatively, but not nearly to the extent that filing for bankruptcy would.
Debt agreements are available to those with an annual income under $77k, and a debt of under $103k.
Debt negotiation is similar to a debt agreement, except with even less of an impact on your credit rating. Usually in exchange for agreeing to pay a lump sum instead of just the minimum, the debtor often agrees to negotiate a lower interest rate to guarantee that they’ll be getting their payments, and enable you to repay it sooner.