Thousands of people file for bankruptcy every other year, and the numbers have soared over the last 14 months. This is because a lot of business owners took a lot of damage during lockdowns and the global recession in 2020, and a lot of them are still reeling and trying to recover. Being in debt during a financially difficult period is a scary situation to be in, and when you can see the debts piling and no way out, then filing for bankruptcy is likely your best bet. However, this is a step that should only be taken when there are absolutely no other options left because filing for bankruptcy will end up negatively affecting future financial and business-related decisions, loans, and opportunities. One other route you can go is to look into your debt relief options.
Debt relief can involve various options depending on what your creditor is willing to consent to, and if you and your creditor are in gridlock, you can have a debt relief counselling agency interfere as a third party so that both parties can safely explore their options. Some creditors can offer debt relief in the form of:
- A consolidation of all of your debts into a single small loan to make things easier for you to manage.
- A reduction in the interest rate of your debt. This can offer serious relief to debtors since interest payments can take up a lot of money.
- There is also the option of actually reducing the principal amount of the debt so that you do not have to pay off as much.
When you go for a debt-relief option, it still affects your credit score, but it is still better than filing for bankruptcy since debt relief affects your credit score half as bad as filing for bankruptcy.