Wednesday, 20 May 2009

Avoid Bankruptcy

Avoiding Bankruptcy - Is It Possible?

You could be forgiven for thinking that there is no alternative to bankruptcy, however if you knew what the long-term implications of filing for bankruptcy were, you would most definitely try and avoid bankruptcy.

Increasing numbers of students are finishing university with large amounts of debt and are unable to make their monthly loan payments. Therefore it is becoming increasingly popular for these graduates to seek bankruptcy as a means to clearing their debts.

In this current economic climate, financial experts have estimated the number of personal bankruptcy cases in the UK could reach more than 100,000 a year and with easy access to credit there seems to be no sign of this trend changing.

So, with the number of UK citizens filling for bankruptcy increasing every year, is there actually a viable alternative? A genuine way to clear all your credit card and loan debt without filing for bankruptcy? Yes, there is.

It is understandable that in order to survive in the modern world you need access to credit. The issue is not having access to credit; the issue is having access to large amounts of credit – and when the uncontrollable urge arises to spend it, it is easy to see how quickly people’s personal debt spirals out of control.

People think there is no alternative but to try to pay off their credit card and loan debt, but all they end up doing is spending years making the minimum monthly payments, which means the actual capital debt – the amount of money they actually borrowed – never or barely decreases. It is a vicious circle. And is this current global financial crisis, people in debt are no longer able to meet their minimum monthly payments and are unable to avoid bankruptcy. This is because they are not aware there is an alternative to bankruptcy.

So, when you are no longer able to keep up the minimum payments on your credit cards and loans what do you do?

Firstly if you have a mortgage you are advised to keep making your monthly payments; however, if you are having difficulty making your mortgage payments, don’t bury your head in the sand - talk to your mortgage lender about your financial situation, and ask if you can take a payment holiday, or negotiate to spread the arrears over a number of months. You will amazed how accommodating many of the mortgage lenders are being at this time.

Your credit cards and loans are another matter: it is possible to negotiate reduced payments with the lenders; some lenders are excepting a single payment of up to 50%, sometimes more, of the debt, just so the debt is cleared. If you do not have the available funds to do this, request a financial statement from your lender, and declare your monthly financial incomings and out goings; this will prove the realistic payment you can actually afford to make each month. You may be surprised how flexible you lender may be. However uncomfortable this experience of having to face the reality of your current financial situation with regard to uncontrollable debt may be, and however attractive the thought of filing for bankruptcy may seem, you should really make every effort to avoid bankruptcy.

Why should you avoid bankruptcy? Although your bankruptcy is cleared in a year, if you go bankrupt you will find it rather difficult to obtain credit for at least 6 years – be it a credit card or loan, a mortgage, even a mobile phone contract. More importantly, if you have own your own home, you will probably lose it.

Finding an alternative to bankruptcy should be your goal: there is a government agreement called an IVA whereby you can agree to a reduced repayment plan with the lenders. Typically the agreement would be to repay 20% to 30% of the outstanding balance over a period of 5 years. IVA’s sound good in theory, however, should you fail to keep up the monthly payments, for whatever reason, you will then default on the agreement and could very easily find yourself back to square one, whereby all the payments are lost and the original outstanding balance is then reinstated. If this happens to you and you own your home and there is sufficient equity in the property to warrant the sale of the house to pay the lenders back, then you will find that your home will be sold and any money used to then pay the lenders.

Is there any other way to avoid bankruptcy?

Yes, there is. It is possible that you can clear the outstanding balance on your credit cards and loans, should the credit agreement that you signed when you took out the loan does not comply with the Consumer Credit Act of 1974. If this is proven to be the case, then the agreement would be rendered unenforceable, meaning the lender cannot enforce the debt – in other words, you don’t have to pay the loan back.

In addition, you may also be entitled to compensation as you may have incurred unfair charges by your lender for late payments, or exceeding your credit limit on your credit card. You may also be eligible for compensation if you had been mis-sold Payment Protection Insurance when you took out your credit card or loan. So, not only may it be possible to avoid bankruptcy by legally clearing the outstanding balances of your credit cards and loans due to the unenforceability of the your credit agreements, but also receive additional compensation for unfair charges.

To find out if your credit card and loan agreements may be unenforceable, please visit where we will be happy to assess your current debt issues, and identify how we can assist you in resolving these concerns as swiftly as possible.

Debt Clear Solutions is a Financial Claims Company authorised and regulated by the Ministry of Justice. in respect of regulated claims management activities, (Authorisation No: CRM15623).

Our goal is to find the best Debt Clear Solution for our clients: an alternative to an IVA, debt management plan or bankruptcy.

So before you consider an IVA - Debt Management Plan, or bankruptcy, visit today and see what bankruptcy alternatives may be available to you.

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