If your debts are unmanageable and have reached the point
where your repayments are starting to outweigh your income, it
is in all likelihood that you've become insolvent. Insolvency
can be caused by poor financial management or by events beyond
your control, such as job loss or illness or injury. Irrespective
of the causes, if you have become insolvent you should seek a
remedy right away. Although bankruptcy may be the best option,
there are alternatives to consider.
It is important to realize that prevention is better than a
cure. Insolvency is usually caused by a failure to deal with
rising debt before it becomes unmanageable. Most importantly,
do not run away from your creditors.
Avoiding your creditors is the worst possible course of action.
If you've reached a stage in which your debts are becoming difficult
to manage, you should contact your creditors and try to come
to an informal agreement. Many creditors provide hardship provisions
which could help to relieve your financial problems and make
your debt more manageable. These provisions could provide you
with more time to pay, allow for a renegotiation of loan repayments
or, in extreme circumstances, allow you to repay a lower amount.
You should also seek financial help from an organization that
has the expertise and experience to provide you with the information
and advice you need. This can be provided by a number of sources,
including financial counseling services.
Another alternative is debt consolidation. By applying for a
debt consolidation loan you can have all of your debts rolled
into a single loan repayment. Debt consolidation can significantly
simplify the management of your debts. Instead of having to make
multiple payments with different interest rates, your debts are
consolidated into a single loan with a single payment due per
month. However. acceptance for a debt consolidation loan is up
to the discretion of the credit provider and you are unlikely
to be accepted for a consolidation loan if your financial situation
has already gotten too far out of control.
One insolvency option that is becoming increasingly more popular
is a debt settlement agreement. Debt settlement agreements offer
a formal alternative to bankruptcy.
In many cases bankruptcy is still the best option. Many people
unnecessarily avoid bankruptcy due to the negative stigma attached
and an unwillingness to confront the reality of their problem.
If you have carefully considered the alternatives and sought
financial help you may find that declaring bankruptcy is the
most appropriate course of action.
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