Whatever happens, don't try to call their bluff.

You might think that the best thing to do is to become ballsy about your situation. After all, you know that they don't want to take legal action (because they stand to recover less of their money), and they know that you know this.

So you brazenly call your lenders' bluff. You ask for interest to be suspended and then offer them a ridiculously low monthly repayment, backed up by the threat ‘if you want any more then I'll file for my own bankruptcy and you'll get nothing'.

Great idea? Not quite!

Most lenders will have heard this type of threat every day of their working lives. It's just defensive bravado that will make your position worse.

Do you know how most lenders will respond to this type of macho posturing? Well first they'll stop being so understanding and then they'll reply ‘go ahead and do it!'

Now bear in mind that most lenders (e.g. banks, building societies, insurance companies etc) are massive organisations, with vast amounts of money at their disposal. So as much as you might like to think that your business is vital to their continued survival, it isn't! Even if they received nothing from your bankruptcy, it would make less of an impact on their balance sheet than a fly hitting an express train head on.

So they double bluff you.

And then what do you do? Do you back down and look weak (in which case further negotiation will be….difficult, to say the least), or do you follow through with your threat and do something (i.e. file for your own bankruptcy) that you don't really want to?

You should avoid this at all costs. Don't even put yourself in that position!

As I said earlier, they don't want to start legal action, but they will if they have to! So don't even test them with this little bluff.