The economic situation of individuals and businesses is most of the time affected by distressed financial times when bankruptcy become the last option. While bankruptcy may help to get rid of unbearable debts, it is worth remembering that the consequences of bankruptcy can be harsh as well, since it may destroy your credit score and force you to give away some of your assets. Luckily, there are alternatives to bankruptcy which would extend the time required for financial recovery to maximum possible duration, and which are less harsh as compared to the implications of the bankr This article is going to examine about some alternative ways through which people can gain financial independence and control of their financial advisors.
Debt Consolidation:
Debt consolidation means hydralizing several debts into one loan that’s got a lower interest rate. It also gives them an opportunity to monitor the installments and reduce overborrowing. People also enjoy the convenient of individual loans, home equity loans and balance transfer credit cards to consolidate their debts. In this case, by using debt consolidation either through business loans or lines of credit is also a business option. The wise use of debt consolidation can profoundly simplify things and even reduce the currently paid monthly charges.
Debt Negotiation:
The main goal of debt negotiation, which is called debt settlement, is to reach an agreement with creditors for partial repayment of the debt which usually amounts to less than the amount owed. This can be a viable solution to people or companies that are not able to complete the repayment either in full or partially. Generally, the debt forum is achieved by working with a third party or negotiating on one’s own with creditors towards a settlement that is acceptable to both parties. Debt negotiation may allow a debtor to reduce overall remaining liabilities however, it could be harmful to the credit score and may require a lump sum payment to the dispute the debts.
Debt Management Plans:
Debt management plans (DMPs), offered by credit counseling agencies, give a helping hand to people who are whoowlity repay their debts over time. At a Debt Management Plan, the credit counseling agency, among many other things like higher interest rates and payment terms, negotiates for lower interest rates and more palatable repayment terms with creditors. Customers send a fixed payment monthly to the credit counseling organization and the latter on its part splits up its total funds by adherence to the charted arrangement. The debt management plan will guide the individual to repay their debts in a pre-determined order thus avoiding bankruptcy and providing better outcome towards their credit scores.
Liquidation of Assets:
To companies, liquidating their assets come as an option for cash during their huge debts so that they can avoid bankruptcy. This could be in the form of an asset sale, which could include inventory, equipment, or any other assets, as a way of getting some cash. When companies dispose assets, performers can pay creditors as well as make the business entities financially viable. Nevertheless, liquidation could lead to a loss of certain assets, with regards to not always sufficient to cover their full amount.
Restructuring and Refinancing:
Restructuring and refinancing literally mean mutually agreeing for outstanding debts to be paid off but with more concessions or discounts. Therefore, a reduction in repayment terms, lowering interest rates, or conversion of debt to equity can be incorporated as well. Businesses may go through their operating process restructuring or try getting new loans or credit to boost their financial situation. Restructure and refinance of debts can lead people achieve this goal, which again is to avoid bankruptcy and deal with their financial disputes in a pragmatic way.
Credit Counseling and Financial Education:Credit Counseling and Financial Education:
Credit counseling, and financial knowledge and skills development may present the necessary tools on how to control and manage one’s finances. Credit counseling agencies provide sessions of counseling, help with budgeting, and programs of debt management to help people to come back to their financial health. Thereby, citizen and business financial health is enhanced through financial literacy and the adoption of contemporary financial practices making it less likely for them to experience future financial perils.
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