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What Factors Can Lead to a Bankruptcy?

By: Michael Millington


In this day and age, it’s much more common to hear of a person or company filing for a restructuring bankruptcy. In order to keep your financial head above water, reestablishing your credit can be crucial. For individuals, filing for bankruptcy can keep yourself in fair shape. For companies, however, filing for bankruptcy can mean the end of your business (even though your financial issues might be solved).

Bankruptcy is often known as the last resort in reference to ridding oneself of debt. The thing about bankruptcy is that it is meant to eradicate debt. For an individual, this can help to bring them back from the brink of financial ruin if given time, but it can also put a huge dent in their credit. It’s a problem if your main concern is to get back on the financial track in the quickest amount of time. Bankruptcy can have effects that last up to a decade and can seriously hinder your way of life for a while.

This would pose the question: how can you avoid having to file for bankruptcy? To clarify, bankruptcy is a choice and not a necessity. Regardless of your financial situation or hardship, you can file for bankruptcy as long as you follow the rules of the filing (show your level of hardship, comply with mandatory credit counseling, etc.). While it can have a devastating effect on your finances (and cost you money), it does have the benefit of eliminating all unsecured debt in one fell swoop. No other form of debt relief can claim to do that.

Avoiding bankruptcy is a matter of figuring out an alternate way to lower your debt. This can be achieved through many different methods. Doing it on your own can be a rewarding albeit taxing experience. Exhibiting enough discipline to eliminate your own debt through your own hard work can give you a renewed feeling on how you view your finances. In many cases, the results mean more if you get them yourself, and this is no exception.

If you find that you cannot achieve debt elimination on your own, then it doesn’t hurt to garner a bit of help along the way. There are other services that can help you to either tackle your debt head on or teach you how best to do it yourself. The two methods in question are through credit counseling and debt settlement. Although each of these debt relief methods have the same end goal, they operate in very different fashions.

Debt settlement puts you in direct contact with a debt settlement company looking to negotiate your debts down with your creditors. This can put you at an advantage within the process, since many of these companies have preexisting relationships with your creditors. The bad thing about this is that debt relief can end up putting you in further credit trouble from not paying your creditors directly. However, this won’t affect you nearly as much as bankruptcy and it doesn’t last nearly as long as bankruptcy.

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