Bankruptcy alternatives often times offer better ways out than filing bankruptcy. A bankruptcy mark remains in your credit report for the next ten years and until then you’re not eligible for any kind of loan. Other options may have the same result but they usually last sooner.
So, before opting for filing bankruptcy and paying a visit to the office of a bankruptcy lawyer take steps to learn other alternatives to bankruptcy. Other solutions, such as credit counseling, debt consolidation loans, debt settlement, and even self debt help may offer better short as well as long-term benefits.
1st Bankruptcy Alternatives – Credit Counseling
A credit counselor can help you draft a debt repayment plan, outlining what needs to be done to clear all of your outstanding balances. They calculate your income, along with any unforeseen financial setbacks, such as medical expenses, are also taken into account when making up this plan.
Whatever is left of your debts are then converted into one lump sum, which you can then start to repay in monthly installments. Although this way cannot totally erase any past damage to your credit report it still helps you to make consistent payments against your outstanding balance, which does reflect positively on your credit report.
So, past bad credit can stay on your report for several years, but working with a credit counseling agency can help you get approved for credit at some point in the future as it shows that you put in a lot of effort.
2nd Bankruptcy Alternatives – Debt Consolidation Loans
The right debt consolidation loan enables you to reduce your debts by rerouting your payments through a single source. To make the loan really works to reduce your debt its interest rates should be lower than the rates of your current debt. A consolidation loan will give you the help that you need to get peace of mind and a concrete way to get you back to financial health.
A debt consolidation loan is an excellent bankruptcy alternative that can help you manage and decrease your debt. There is no way that you can completely fix bad credit without the ability to reduce debt and pay your bills on time. However, once your debt has reached a certain level, this can seem almost impossible to do. That is why having a debt consolidator handy is such a worthwhile idea.
3rd Bankruptcy Alternatives – Debt Negotiation or Settlement
Debt negotiation or debt settlement is an option where the company negotiates with creditors to reach an agreed-to amount to pay off the original debt. The creditors are willing to accept a reduction as much as 50-60% to collect a debtor’s money than risk losing everything if the debtor files bankruptcy.
A debt negotiation plan is usually offered if you can’t pay the minimum payment of a debt consolidation program nor have outstanding debts on which you haven’t paid in the last 3 months. Once you take part in a debt negotiation program you stop paying your creditors.
The company then either takes monthly payments from you or stores it up in an account. During the accumulation of your funds, the firm negotiates a settlement with your creditors for a lower payoff amount. Once the settlement is reached the company makes a lump sump of payment to your creditors.
4th Bankruptcy Alternatives – DIY Debt Management
Self debt management is a bankruptcy alternative that is right for you, if your debt level is simply not enough to justify going to debt consolidation firm. This is also true if your debt occurred through an emergency such as medical expenses. While a debt consolidation service would make sure all of your debts got paid off, it’s sometimes possible to do this faster by yourself.
You may start by calling your creditors to negotiate. Creditors may not be willing to work with you, but you may be able to at least get some fees reduced, or perhaps some late charges removed. They may be willing to remove some charges and fees if they know you are going to be able to pay them in full. This might save you a bit.
Once you have called all of your creditors, you can then send out all the payments. Be sure that you have called all of your creditors to find out the exact amount you should send them, or you will end up with another bill next month for any interest which was added on after the last bill was sent out.
Now that you know different bankruptcy alternatives you are ready to pick an option that suits your needs. Remember, lawyers often lead their clients to bankruptcy and not helping them to find the best solution. So, visiting a bankruptcy attorney should be your last resort.