How to Avoid Bankruptcy With Debt Consolidation & Unsecured Loans

Bankruptcy is intended to be a means of last resort to resolve a debtor's financial issues. If you are facing significant financial challenges, you may contemplate bankruptcy. However, before you move forward in that direction, consider how to avoid bankruptcy with debt consolidation and unsecured loans. There are strategies that you can employ to obtain debt consolidation and unsecured financing as a means to resolve your debt issues and avoid the need for bankruptcy protection.

Difficulty: Moderately Challenging

Instructions

Things You'll Need:

• Application forms for debt consolidation loans
• Application forms for unsecured loans

1. Contact your existing creditors and explain to them that you are pursuing debt consolidation and the possibility of unsecured loans as a means of avoiding a bankruptcy. Advise them that if you file for bankruptcy protection you will file under Chapter 7. Chapter 7 is the type of bankruptcy that results in the discharge of your debt, leaving your creditors with no ability to collect on your accounts. By advising creditors of your intentions and the prospect of Chapter 7 bankruptcy, they likely will be supportive of your efforts to consolidate debt and obtain additional financing because their best interests are served through this course as well.

2. Apply for a debt consolidation or unsecured loan initially with any of your creditors that are banks or similar types of financial institutions.

3. Contact a loan broker. There are loan brokers in business that specialize in assisting people attempting to avoid bankruptcy. These professionals assist in connecting people like you with lenders that specialize in loan consolidation and limited supplemental financing for people dealing with debt issues who want to stay out of the bankruptcy court. These loan brokers do not charge you a fee for their services. They are compensated by a lender if a debt consolidation loan or other type of financing is originated for you.

Tips & Warnings

• If you want to have the best chance of avoiding filing for bankruptcy, you need to be proactive. You need to seek out alternative financing--including debt consolidation or other types of financing--as soon as possible. The longer you delay seeking such financial relief, the less likely you will be to find a lender that can provide the assistance you require.

References

• "Do It Yourself Debt Consolidation;" D. R. Bonds; 2007
• U.S. Government: Direct Consolidation Loans
• "Debt Consolidation 101: Your Self-Help Program;" Kathleen McEwen; 2005

Resources

• American Bar Association: Bankruptcy & Insolvency Litigation Committee

Who Can Help Sponsored

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