Many people who have  excessive debts with different creditors do not know what to do to resolve their problem. When this happens, one of the the first solutions that comes to mind is often filing for bankruptcy. But should you declare bankruptcy right away if you can’t keep up with debt repayment?

Is it possible to recover from bad debt without resorting to bankruptcy?

Get Out of Debt Without Having To Declare Bankruptcy

Since the amendment of the Bankruptcy Law, the process has become more complicated that it was a few years ago. Back then, it was not required for an individual to go through credit counseling before submitting a bankruptcy application.

Today, it is the first step towards applying for bankruptcy. Unless you complete a credit counseling course with a government accredited credit counseling agency, you will not be qualified for filing. If the counseling agency recommends other solutions, then the borrower must try out the alternative solutions first instead of seeking bankruptcy right away.

What is the Income Means Test?

An applicant for bankruptcy will be required to go through the Income Means Test to determine the type of bankruptcy he/she is eligible for. Bear in mind that only a Chapter 7 Bankruptcy discharges a borrower from all debts. Meanwhile, Chapter 13 Bankruptcy subjects the borrower under a mandatory five-year repayment plan.

What are the common alternatives to bankruptcy that credit counselors recommend?

What are alternative solutions for bankruptcy? Your credit counselor can give you advice on possible solutions that you can consider. Perhaps a counselor can suggest consolidating your debts with secured loan. Your counselor may also arrange to negotiate with your creditors to reach debt settlement. If your debts are primarily made up of outstanding balances from your credit card accounts, you may be advised to get a balance transfer card with zero interest rate so you can get concentrate on your debt repayment. These are just possible solutions that you can try aside from bankruptcy.

What If Bankruptcy is A Must?

If your credit counselor suggests that filing for bankruptcy is your best option, then you need to hire a lawyer to handle the transaction for you.  Its recommended that you seek out a lawyer that specializes in bankruptcy.   Having the lawyer assist you will ensure that your bankruptcy application will get approved at the soonest possible time.

Once discharged from your debts through bankruptcy, you will need to work on rebuilding your credit history right away. Remember that bankruptcy will erase all the past credit problems, but will remain on your credit report for up to 10 years.

Its important that you start to rebuild your credit as soon as possible.  One of the best ways to do this will be to obtain a secured credit card and start reporting your rent payments on your credit report.