2 Ways to Use Debt Management to Avoid Bankruptcy
For people who have gone in too far over their heads – bankruptcy might be one of the only options left for a fresh start. Unfortunately, bankruptcy has a number of negative side effects – each of which can severely restrict your future.
Thankfully, a debt management service could be the answer to all of your problems. Many people don’t know what a debt management service is, and therefore have no idea that before applying for a bankruptcy discharge – they might be able to try something else to banish their financial woes. In this article, we’ll look at two plausible ways that debt management could help to prevent long term bankruptcy.
Option One: Complete Debt Repackaging
It is estimated that up to 70% of people declare bankruptcy unnecessarily. Even though financial advisers do take a close look at every individual case before proceeding with bankruptcy, usually they have their own criteria for determining which situation warrants a bankruptcy and which doesn’t.
One of the ways that many of these 70% of people could avoid such a negative action, such as bankruptcy, would be to have all of their debts completely repackaged. The problem that most people face is that they have a credit card over here with 22% interest, a personal loan over there with 20% interest, and a home loan somewhere else with 6% interest.
What this person could do is apply for a debt repackaging solution with a debt management service, whereby those high interest debts are reduced to a single, low interest package. This reduces the overall cost of the debt, and could ultimately be enough to prevent a bankruptcy.
Option Two: Creditor Negotiation
If you are lucky enough to find a debt management service which has a very good track record and therefore a decent working relationship with one or more of your creditors – things could be looking up. Usually, these working relationships help to lower the cost of debt to you, because of the following:
- Special rates of interest have already been pre-negotiated
- Your debt management service might have insiders or co-operatives within the other company
- Commissions / trade partnerships might be in place
At the end of the day, the better the relationship between your debt management service and the creditor, the more likely you are to benefit – and therefore the more likely you are to avoid bankruptcy as a result of the lower cost of debt.