Should you file for bank­ruptcy?

The Punch - - PERSONAL - Source: www.the­bal­ance.com

There is a stigma against fil­ing for bank­ruptcy and for good rea­son. It dev­as­tates your credit and crip­ples your bor­row­ing abil­ity.

Even though bank­ruptcy will fall off your credit re­port af­ter years, most loan ap­pli­ca­tions ask if you have ever filed. If you say “no” when the truth is “yes,” you are guilty of fraud and can be pros­e­cuted.

It is al­ways bet­ter to pay off your debts than file for bank­ruptcy. A bank­ruptcy fil­ing could also have im­pact on your emo­tional life or your per­sonal life.

Peo­ple who have filed for bank­ruptcy re­port feel­ings of re­grets and fail­ure years af­ter fil­ing.

As you think about fil­ing for bank­ruptcy, here are some things to con­sider.

Have you tried ne­go­ti­at­ing with your cred­i­tors?

Cred­i­tors would rather set­tle a debt with you than have it dis­charged in bank­ruptcy. It may be eas­ier to ne­go­ti­ate a set­tle­ment if you are al­ready a few months late on the pay­ment.

If you are cur­rent, cred­i­tors don’t see any rea­son to lower your debt. That is not to say you should pur­posely fall be­hind on your pay­ments so you can get a set­tle­ment; but if you are al­ready be­hind, it gives you a bar­gain­ing chip.

Have you sought credit coun­selling?

Of­ten when you’re un­suc­cess­ful in ne­go­ti­at­ing with your cred­i­tors, a con­sumer credit coun­sel­lor can get re­sults. Credit coun­sel­lors can of­ten get lower in­ter­est rates and monthly pay­ments. They don’t have any spe­cial pow­ers; they just know the right thing to say.

Un­der the bank­ruptcy law, you’ll have to get credit coun­selling for six months be­fore you can file for bank­ruptcy; so you may as well ex­plore it as a bank­ruptcy al­ter­na­tive. This can, but some­times doesn’t stop the calls from com­ing.

Are your wages be­ing gar­nished?

If your cred­i­tors and lenders have al­ready got judg­ments against you and have gar­nished your wages, fil­ing for bank­ruptcy could stop the wage gar­nish­ment and may be able to help you get some of the gar­nished money back.

Do you have as­sets?

If you do not own as­sets or if the as­sets you own are worth less than the debt you owe, you might con­sider fil­ing for bank­ruptcy.

Ad­di­tion­ally, if you have as­sets that are se­cured with a loan, you could file for bank­ruptcy to keep from los­ing th­ese as­sets (such as a house or a car).

Do you have ac­cess to sav­ings?

When you file for bank­ruptcy, you will be re­quired to list out all your as­sets. While cer­tain as­sets such as al­imony, child sup­port, cer­tain pub­lic ben­e­fits are pro­tected, gen­eral sav­ings gen­er­ally are not. Fil­ing for bank­ruptcy may be an op­tion if you don’t have any sav­ings with which to pay back your debt.

Have you been sued?

If you have re­ceived a law­suit sum­mons, you should con­tact an at­tor­ney. Don’t ig­nore the sum­mons or else the plain­tiff (the per­son su­ing you) could ob­tain a de­fault judg­ment against you and could be granted per­mis­sion to gar­nish your wages or seize one of your as­sets.

Fil­ing for bank­ruptcy could pre­vent any judg­ments from be­ing ob­tained against you.

Con­tact an at­tor­ney

Ev­ery sit­u­a­tion is unique. The in­for­ma­tion pro­vided here is for in­for­ma­tional pur­poses only and is not le­gal ad­vice. If you are se­ri­ously con­sid­er­ing bank­ruptcy, con­tact a con­sumer law at­tor­ney to talk about your bank­ruptcy op­tions.

An at­tor­ney can re­view the facts of your sit­u­a­tion and help you de­cide if fil­ing for bank­ruptcy is the right op­tion for you.

How to re­duce your debt pay­ments

Prop­erly man­ag­ing your debt level is one of the keys to fi­nan­cial suc­cess. Whether you are a multi-mil­lion naira pro­fes­sional or a blue-col­lar worker, suc­cess­ful debt man­age­ment is your path to fi­nan­cial free­dom.

If you are strug­gling to main­tain or re­duce your debt, you can get your debt pay­ments back to a man­age­able level.

Ne­go­ti­ate with cred­i­tors

Ob­tain a copy of your most re­cent credit re­port and billing state­ments to come up with a list of all your cred­i­tors and lenders, in ad­di­tion to the bal­ances owed. Then, fig­ure out how much you are able to pay each. Call each cred­i­tor and let them know you are will­ing to pay the debt. but when you do, make sure that you have al­ready cal­cu­lated a pay­ment that works within your bud­get.

Your credit card is­suer may of­fer a hard­ship plan that will lower your pay­ments or in­ter­est rate for a pe­riod of time.

If the cus­tomer ser­vice rep says no, don’t fight or ar­gue; sim­ply ask to speak to a su­per­vi­sor and ask again. Make sure to get any agree­ment in writ­ing, prefer­ably on com­pany let­ter­head, be­fore mak­ing a pay­ment.

Con­sol­i­date

Com­bin­ing your debt with debt con­sol­i­da­tion or a home equity loan can give you a lower monthly pay­ment.

Av­er­age the in­ter­est rates on your cur­rent debt and look for a loan that has a lower in­ter­est rate than your cur­rent av­er­age.

If you qual­ify for the loan, you can use it to pay off your ex­ist­ing debts; then fo­cus on mak­ing a sin­gle monthly pay­ment on the loan.

Debt con­sol­i­da­tion loans are not the only op­tion for con­sol­i­dat­ing debt. Con­sider also a per­sonal loan, home equity loan, or cash-out re­fi­nance.

be care­ful about get­ting a loan that sim­ply low­ers your pay­ments by ex­tend­ing the re­pay­ment pe­riod. You will likely end up pay­ing more in­ter­est over time than you would oth­er­wise.

Trans­fer bal­ances

If you have a good credit score, you can of­ten get a bal­ance trans­fer credit card with a lower in­ter­est rate than your other credit cards.

Some­times you can even get an ex­tremely low in­tro­duc­tory in­ter­est rate and use the in­tro­duc­tory pe­riod to make in­ter­est­free pay­ments on your debt.

•L-R: Pres­i­dent of Dan­gote Group, Al­haji Aliko Dan­gote; Min­is­ter of In­dus­try, Trade and In­vest­ment, Otunba Adeniyi Ade­bayo; Min­is­ter of State, Am­bas­sador Maryam Katagum; and Per­ma­nent Sec­re­tary, Dr Nasir Sani-gwarzo, dur­ing the visit of Dan­gote to the min­istry in Abuja... on Thurs­day. Photo: NAN

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