Filing for bankruptcy is a difficult decision to make. It affects your credit rating and borrowing capacity in near future. Hence, declaring bankruptcy should be considered as last resort. There are other alternatives available which can pull you out from such awkward positions. There are numerous reasons for people to avoid bankruptcy. People filing bankruptcy have to bear the loss of their assets. In most of the cases court used to sell those assets like house, plot or even car to clear off debts. Whenever you file for bankruptcy, then control goes to the magistrate handling your case and your fate can be decided by him judging the information received by Official Receiver. Bankruptcy 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.

There are several things one can do as an alternative to filing for bankruptcy.

1. Judgment proof: This is the most basic alternative. Simply 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.

2. 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. 

3. Chalk out the Budget: Before arriving to any decision of filing for bankruptcy, take a good look at your detailed information of monthly income and monthly expenses. This will help you in better understanding of your resources and a more organized way can avoid bankruptcy. 

4. 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. 

5. 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 of the previous debts to higher rates. 

6. Negotiations and Settlement: If you are confident enough that this adverse, tricky financial condition is temporary, then with Negotiation and Settlement with your creditors your benefits are higher. In this process you have to negotiate with creditors and work out a new re-payment plan.

7. Credit Counseling Services: Instead of negotiating personally you can contact these agencies which normally are nonprofit organizations and you can found them on United States Trustee’s associated website. These agencies work with the aim of reduction of interest rates or full amount of debt. 

8. Individual Voluntary Arrangement: It is a good alternative to bankruptcy. It is a formal proposal by the individual to his creditors to re-pay a percentage of total loans over a certain period of time (in most cases it is usually 5 to 7 years).