When you are faced with a large amount of debt, bankruptcy may seem like your only hope. However, there are several alternatives to bankruptcy that you may not realize are in your best interest to consider. It’s important to take a closer look at each of these alternatives before making the decision to file for bankruptcy.
Why Choose an Alternative to Bankruptcy?
If you file for bankruptcy, the record could stay on your credit report for 7-10 years. It will remain on public record forever. This could affect your eligibility for future loans for many years (auto, home, etc.) and may also affect your ability to secure a rental property or even employment sometimes. Filing for bankruptcy may not be your only option if your debts are overwhelming or seem unbearable, you may want to look at other options before you make such a big financial decision.
Some people may consider bankruptcy because they think that is their only option to stop collection calls. Others may not realize that they may be able to negotiate with creditors. Whatever situation you are in, or whatever reason you are considering bankruptcy, be sure to check with a credit counseling agency before you make the decision to file for bankruptcy. They are knowledgeable in the alternatives to bankruptcy and are also aware of the laws in place that are designed to protect you from abuse or harassment from creditors.
Debt Consolidation or Debt Settlement
Before filing for bankruptcy, you should consider contacting a reputable debt counselor to find out if debt consolidation or debt settlement would help your financial situation. If you are eligible for debt consolidation, you may be able to not only reduce your number of payments that you are making each month, but also the total amount paid depending on what program Debt Relief programs your creditors offer. Before filing for bankruptcy, it’s important that you talk with a professional to find out if you could benefit from any other Debt Relief options that may be available for your situation.
By choosing debt settlement, you may be able to negotiate a deal or several deals with your creditors which could result in a reduced lump sum payment or a reduced structured payment plan schedule. By implementing debt settlement as an alternative to bankruptcy due to special financial hardships, you may be able to satisfy the creditors without having to goto court depending on the unique particular situation and hardship.
Liquidate Your Assets
If you are considering bankruptcy, small changes probably are not going to work for you as well as they would for someone with a smaller amount of debt, however, there are some things that you can do that can be viable alternatives to filing bankruptcy. If you own your home, look into whether a home equity loan would help your situation. If interest rates have decreased since you bought your home, you may be able to refinance your mortgage and end up with a lower monthly payment. Then the money you would have been paying for your mortgage can be used to pay down your debts.
Another option is to take a look at what assets you have and sell what you can in order to pay off your debt. If you have a large home, consider downsizing and use any profit from the sale of your home to pay your debts. If you have a car and could make do with an older car, or even go without a car, consider selling it and using the money to pay down your debt. You may also want to consider cashing in any bonds or stocks that you have. If you have a lot of gold or silver, look into selling it for cash. Clean out your attic, basement and/or garage and sell whatever you don’t NEED to have in order to pay down your debts. Though it may seem extreme, liquidating your assets often is a better option than filing for bankruptcy, which can affect your financial future substantially.
Ask for Help
Many times family members are willing to help if you are in a financial crisis. But many times family members simply cannot help, even though they’d like to. Before you make any decisions regarding bankruptcy, make sure that you contact a professional to discuss your financial situation. A credit counselor may be able to help you not only avoid bankruptcy, but also get yourself into a better place financially.