Bankruptcy Court

    Bankruptcy is not an easy experience and debtors should try to avoid bankruptcy at all costs.  It is not that easy for unlimited spending sprees to end in a straight bankruptcy filing these days since there is now a means test.  Bankruptcy filings, even if they are the quicker Chapter 7 bankruptcy liquidation route, take their psychological toll on the debtors and their families.  Instead of trying to figure out how to file bankruptcy, debtors should be trying to figure out how to avoid bankruptcy, even though it means paying off their debts.  Bankruptcy filings stay on the debtors credit record for seven years, if it's a Chapter 13 bankruptcy, and ten years, if it's a Chapter 7 bankruptcy.  This means that during that period, and possibly after, the debtor will have problems obtaining credit.  The after effects of a bankruptcy filing don't just go away after a few months.

How to Avoid Bankruptcy Filing

     Debtors should be looking for ways on how to avoid bankruptcy, with filing bankruptcy as being their last resort.  One way is to contact the creditors, let them know your dire financial situation and that you are willing to work with them with a restructured payment schedule, renegotiated debt, etc. in order to avoid a Chapter 7 bankruptcy or a Chapter 13 bankruptcy filing.  You are showing the creditors that you are making an effort to work things out with them.  Most creditors will work with you because it is in their best interest to recover their money rather than see the debt discharged by a bankruptcy court.

Alternatives on How to Avoid Bankruptcy

      Another solution worth looking into is debt consolidation.  Debt consolidation agencies have counselors that will evaluate the debtors situation and advise him/her as to the best approach on how to avoid bankruptcy.  The debt counselors will deal with the creditors, working out payment schedules, renegotiated the amount of debt and handling the debtor-client's finances. This way, the debtor avoids a bankruptcy filing.  He/she avoids all of the stress and strain and other psychological effects and there is no stigma on his/her credit record.  He/she makes one payment a month and is free from calls from credit agencies since the creditors are handled by the debt counselor.

       For some people, who are living at the subsistence level with no change in their situation coming in the future, the best thing to do is nothing.  They won't be sued because they have little or no property and nothing for the creditor to attach or put a lien on.  In this case, most creditors will just write off the debt.  Even though the nonpayment and write-off is reported on the debtor's credit record, it will disappear after seven years.

     In summary, there are alternatives to filing bankruptcy when people find themselves in dire financial straights.  These options, while more time-consuming, results in repayment of all of part of the debt, result in less psychological strain and adverse effects on the credit record.  It also shows that the individual is responsible enough to try to work out the problem rather than just liquidate. With a little work you can find out how to avoid bankruptcy.