Should you file for bankruptcy?
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.
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.
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