Avoid Bankruptcy
Bad Debt Consolidation by splinder
Filed under Bankruptcy
A bankruptcy record on a credit report can be catastrophic, as it can ward off creditors from extending loans in the future for a substantial period. It is also necessary to remember that credit reporting agencies are required by Federal law to report bankruptcy for at least ten years after the filing. So, individuals must endeavor to avoid bankruptcy and the numerous long-term pitfalls associated with it.
Maintaining a Good Credit: An Imperative to Avoid Bankruptcy
Keeping track of one’s credit status is the first step towards maintaining a good one. The smart way to do this is to review one’s credit report, periodically. In the US, individuals are entitled to a free copy of credit report annually from three credit reporting agencies, namely:
- Equifax
- Trans Union
- Experian
A credit report is essentially a summary of all the open lines of credit maintained by an individual, along with the payment patterns on them. Reviewing a credit report is necessary to ensure a closed line of credit, if any, is not included in the report as it pinpoints to a greater debt burden.
Proper Credit Card Usage to Avoid Bankruptcy
Bankruptcy is a direct outcome of wrong financial decisions. Excessive credit card, reckless spending and unlimited purchases are key factors that pave the way for bankruptcy.
An individual needs to create a well structured plan that helps to keep expenses in control, improve a good credit standing and avoid bankruptcy:
- Do not acquire multiple credit cards. Ideally, the number of credit cards owned must be less than three.
- Make timely payments. Aim to pay more than the minimum monthly payments that are indicated on the credit cards. Increasing the size of monthly payments can also help to negotiate for lower interest rates.
- Make use of interest-free credit period alternatives, if any, by paying the entire dues before the period expires.
- Practice credit consolidation. Multiple credit card owners must increase monthly payments on high-interest credit cards, even if it means temporarily halting payment on low-interest credit cards. This helps to close pricey credit card accounts faster and save more meaningfully on interest rate payments.
Finally, individuals can consider credit card settlement to avoid bankruptcy. Credit card settlement implies negotiating to reduce the amount of outstanding debt. Although, a credit card settlement is reported on and reflects badly on a credit report, it is a preferred alternative to filing for bankruptcy.