Personal Bankruptcy is only One Possible Way to Eliminate Debt
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Filing personal bankruptcy has helped millions of Americans reduce financial stress and get their finances under control.
Although filing Chapter 7 or Chapter 13 bankruptcy may bring much needed relief from debts and harassment by credit collection agencies, bankruptcy isn't for everyone.
When you're deciding your financial future, it's always wise to explore all of your options. So, we have put together a list of common bankruptcy alternatives. The list below highlights some of the general pros and cons of each bankruptcy alternative.
Knowledge is power. Even if you are not ready to consider filing bankruptcy, learning about the process and the alternatives may allow you to make informed decisions for your financial future.
If you are interested in learning more about the bankruptcy process, we'll be glad to connect you with a local bankruptcy attorney who can answer your questions. Simply fill out our free bankruptcy case evaluation form or call 877-833-2410.
Some Possible Alternatives to Filing Bankruptcy to Clear Debt
Some common alternatives to filing bankruptcy include:
Paying Off Debts: those who aren't facing a serious financial crisis may find that it's possible to cut the budget and/or increase income to get debts paid off. By living within a tight budget and/or taking on a second job, some people can avoid filing bankruptcy and get caught up on their debts. One advantage is that getting debts paid off means that there's no bankruptcy on your credit report. However, any late payments and charge-offs will remain for up to seven years. Some debtors are also able to negotiate with creditors for lower interest rates and payments. The down side of this option is that it requires big changes: cutting spending and working more. People attempting to pay off debts outside of bankruptcy also do not have the protection of the bankruptcy automatic stay.
Negotiating with Creditors: people who are comfortable negotiating with creditors and have the means to do so may be able to negotiate new repayment plans and get lower interest rates. This can create a greater sense of control over debt and finances and can relieve stress.
Debt Consolidation Loans: in some cases it is possible to consolidate all debt into one loan. These loans usually offer a lower interest rate and a lower monthly payment. However, consolidating debts often means converting unsecured debts such as credit cards into a secured debt, using the family home or other property as collateral. This increases the risk because if the loan isn't kept current, it could mean losing the home or other property used to secure the debt. Depending on the terms of the debts in question, consolidation might also mean paying more in the long run.
Credit Counseling Agencies: a credit counseling agency may be able to help negotiate for lower interest rates or an extended repayment schedule for debts. This can be extremely helpful in reducing or eliminating collection calls from creditors and creating some breathing room to catch up on debts. The major risk associated with this process is that not all credit counseling agencies are honest. The U.S. Trustee Program Website maintains a list of reputable credit counseling agencies. Another issue is that this alternative to bankruptcy does not provide the same security as Chapter 13 bankruptcy in the event of unforeseen circumstances like job loss or serious illness.
Settling Debts: debt settlement firms can be a go-between with creditors and in some cases can significantly reduce debts. However, debt settlement firms, like credit collection agencies, are not always reputable. Unfortunately, many people who work with debt settlement firms end up with higher balances, new fees, more damage to their credit reports, and often end up filing for bankruptcy protection anyway—after investing thousands of dollars in debt settlement. Should you decide to explore this option, be sure to check out the company you're considering with the Federal Trade Commission, your state's consumer protection division or Attorney General's office, and the Better Business Bureau in order to speak with a reputable debt settlement company.
Doing Nothing: the ostrich approach may sound weird, but some people who have few assets and a small income never find it necessary to take action. However, for most people, doing nothing is not generally advisable, especially if there are assets or income that could be subject to collection. Ignoring serious financial problems tends to let them grow out of control, which could mean wage garnishments, loss of property, and serious credit damage.
Wondering What To Do Next?
Exploring your options can really ease your mind. Many people in tough financial circumstances feel that they don't have choices, but that's far from true. By speaking with a bankruptcy lawyer, you can get advice and information to help you decide which options could really make your life easier.
Get a firm grasp on your finances so that you can stop worrying and get back to enjoying life. At Clear Bankruptcy, getting in touch with a local bankruptcy lawyer is easy. Simply fill out our free bankruptcy evaluation form or simply call 877-833-2410.