Lured by the attractive loan schemes, you may sometimes land yourself in a situation where you will lose the balance between your monthly income and expenditure. It is a catchy position where you can find it difficult to make your monthly payments. May be you are thinking about filing bankruptcy. But, declaring financial failure may not be the last option available. Filing for bankruptcy is a difficult decision to make. While it can assist you in alleviating your dues and debts, it can also affect you more adversely than you can think of. It can have disturbing effects on personal and professional life for a longer duration. It affects your credit rating and borrowing capacity in near future. Hence, declaring bankruptcy should be considered as last resort. Reasons for Finding the Alternatives There are other alternatives available which can pull you out from such a difficult position. There are numerous reasons for people to avoid this situation.

1. People have to bear the loss of their assets. In most of the cases court sells assets like house, plot or even car to clear off debts.
2. Control goes to the magistrate handling your case and your fate can be decided by him judging the information received by Official Receiver.
3. It has a very devastating effect on your credit history for at least next 7 years. With such a poor credit score, it becomes very difficult to get a loan or mortgage to start a fresh life.
4. It can also ruin your career prospects. There are certain careers which do not accept you if you are bankrupt. There are even a few restrictions on being a director or owning a business if you are bankrupt.
5. It hampers your social life to a large extent. It is quite embarrassing situation, once it gets advertised in newspapers.

What are the Alternatives? In October 2005, the Bankruptcy Abused Prevention and Consumer Protection Act came into force. So before you make any decision, consider all your options and choose the best one for your situation. Judgment Proof This is the most basic alternative. You have to take no action at all. With a very small income, if you owe money to creditors, you may be considered as judgment proof also known as collection proof. That means, if your creditor sues you, he just won't be able to collect because you don't have anything which they can legally get hold of. So in most of the cases, creditors may decide to write off your debts. But you have to keep one thing in mind that if your financial condition improves in the future, then you will not be considered as judgment proof any longer. Call Creditors Don't try to shun off from the situations. It is always better to call the creditors and convince them about your financial situations. They may come up with an alternative pre-payment plan, which can get you out of this catchy situation. Chalk out the Budget Before making any decision, take a good look at your detailed information of monthly income and monthly expenses. This will help you in better understanding your resources, and a more organized way can avoid the situation. Balance Transfer In some cases, you will be able to transfer your loans from higher interest rates to lower ones. You can also apply for a new credit card which can offer low interest rates. But be sure of the introductory lower rates as they do not serve the purpose. Refinancing Loans If you are credit worthy or in good books of your creditors, you can get a refinance with better terms which can help you to clear off the previous debts. Negotiations and Settlement If you are confident enough that this adverse, tricky financial condition is temporary, then with negotiation and settlement your benefits are higher. In this process, you have to negotiate with creditors and work out a new repayment plan. Credit Counseling Services Instead of negotiating personally, you can contact agencies which are normally nonprofit organizations and they can be found on the United States Trustee's associated website. These agencies work with the aim of reduction of interest rates or full amount of debt. Individual Voluntary Arrangement It is a formal proposal by the individual to his creditors to repay a percentage of total loans over a certain period of time (in most cases it is usually 5 to 7 years). With this alternative, sometimes as much as 60 % of the principal amount is written off. With this, even the monthly payment can be kept very low. There has been a great increase in the number of people choosing the alternatives. They offer many benefits like keeping our own assets, having no effect on professional qualification, and no adverse effects on social status and credit scoring.