Recognition and acceptance are the two key words when your personal finances hit the skids. It is crucial that you quickly recognise that you have a problem and accept that you will have to make some changes to get it under control. When you are acting before any of your creditors are taking action against you then you have the advantage because you are presenting as a responsible citizen who wants to repay the loan but just needs a little help in bringing that about. When your creditors have chased you for payment you are presenting as an irresponsible person that is trying to avoid paying the loan and the creditors will be baying for your blood.

Depending on your circumstances you may decide to approach your creditors and tell them of your plight and offer to make regular payments of a lesser amount until you are in a position to resume the original agreement. Most lenders will agree to such a request but make sure that this is documented in some way so that they cannot deny it at a later stage. Another way that I have negotiated for a client was to stop further transactions on the card and that interest rates be dropped to 6% and the card be paid off within 2 years. This in effect turned a credit card loan at 18% into a home mortgage loan at 6% and the bank was happy because they were getting their money back when the alternative was bankruptcy.

In cases where the debts are relatively minor and you have some sort of income a court may decide against bankruptcy in favour of making an order that you make payment through the court to satisfy your creditors. There are Credit Unions, which are similar to banks, but can operate at a much lower fee structure and they can be used for your employer to deposit your wages into your account and the Credit Union will disperse the money amongst your creditors in the required amounts.

For debts larger than $10,000 you may have to resort to bankruptcy but exhaust every other avenue first. Attempt to make arrangements with your creditors to repay regular amounts. See if you can negotiate an interest holiday for 12 months so that your regular payments are really reducing your capital amount. By making these arrangement you are exercising control over your financial affairs and denying your creditors the chance to put you into bankruptcy thereby destroying your life. You will remain in control of your assets and will not have restrictions placed on you and of course the major advantage is that your credit score will be improving and you will have avoided your credit report showing that you have been declared bankrupt.