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Debt Management – How To Save Yourself From A Bankruptcy

By Janet Lacey
Published: Saturday, November 7th, 2009

In recent times, many debt ridden people have started thinking of bankruptcy as a way out of their financial problems, not knowing that it will not only lead to financial difficulties throughout life but also blemish their career. As of now, there are thousands of Americans who are unable to pay their bills on time or manage their debt. If you are one of them, then you might be considering bankruptcy as a way out. Please DON’T. 

Bankruptcy should only be considered as a last option after you have tried out all other debt management tools. This is because bankruptcy, while being a short term solution, has very long term repercussions. Apart from making you a pariah in the world of credit, a bankruptcy will also make you a social outcast in a normal working world.

 Some of the main debt management tools that you can try out before you consider bankruptcy are: 

Negotiate With Your Creditors: In the post recession scenario, almost all credit companies are ready to negotiate with debtors to provide easier repayment terms and lower installments as an alternative to losing all their money. Instead of running from your creditors and avoiding their calls, a better option is to call them up yourself and explain your position. Tell your credit companies that you want to pay off your loan, but you cannot because of whatever financial difficulties you are facing. Request for an alternative payment plan, lower interest rates or waive late fees to make repayment easier. 

Use Balance Transfer: If you feel that your financial situation may improve within the next two three months or so( this feeling should be based upon solid foundations, like a new job you may be picking up, a promised increase in salary etc), then using balance transfer cards can be a good strategy. A number of credit card companies offer balance transfer cards with very low interest rates during the first 6 months or so. You can transfer your balance from all other cards to your new 0% APR balance transfer card to avoid further increases in late fees and interest on your outstanding credit card bills. This method can be very helpful if you can manage to pay off the major share of balance on your balance transfer card before the interest rate on it gets hiked up. 

Go For Debt Consolidation: A debt consolidation company will pay off all your existing debts. The only debt you will owe after debt consolidation is to the company that has consolidated all your debts. As a rule, debt consolidation loans come with easier repayment terms and lower rates of interest than most other loans. If you are in a severe financial crisis, then you may opt for debt consolidation after you have already gotten some amount or fees waived off through your negotiation with creditors. This will make your debt consolidation loan easier to pay off and more affordable.

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