Debt has become a part of day-to-day life for many individuals. When debt becomes too overwhelming, bankruptcy is often one of the first options that people think of as a solution. Unfortunately, a declaration of bankruptcy can have far-reaching and often damaging effects on both your current and future finances and credit score. For individuals considering filing Chapter 7 or Chapter 13 bankruptcy, consider some of these alternatives.
Pay Down Debt
Should you file Chapter 13 bankruptcy, whether because you want to retain your assets or because the court denied your Chapter 7 case, you will have to continue making payments toward your debt over the course of three to five years. Examine your budget before filing to see if there are any extras you can cut out. Unnecessary memberships and subscriptions are a good place to start. If you can figure out a way to live within your means, you might find that you have enough money in your budget to make your current payments.
Take a close look at your possessions and sell off anything superfluous, especially items that continue to be a drain on your finances. Turning to sites like eBay and Craigslist (or even having a yard sale) are good ways to get a good price for furniture, electronics, jewelry, and other luxuries. Material things are nice to have, but they can always be reacquired. The damage that bankruptcy can do to your current and future financial situation is more severe than the loss of a few possessions.
Request Help from Creditors
Creditors want to be paid, even if it’s a fraction of what they’ve invested over a longer period of time. Give your creditors a call and inform them of your intention to file for bankruptcy. Be gracious and tell them that you are willing to pay the debt, but need assistance in the form of a lowered monthly payment or an interest rate reduction. Most creditors have programs (often known as “hardship programs”) in place to deal with these situations.
Try Consumer Credit Counseling
If your attempts to deal with creditors alone are not working, consider looking into consumer credit counseling professionals. Their experience in working with creditors can help you get interest rates and payment amounts that you can afford. Additionally, new bankruptcy laws require credit counseling before a bankruptcy filing, so it is well worth considering as an alternative.
Creditor and Debt Collector Settlement
Debt settlement should be a last resort. In comparison with bankruptcy, however, it is the better of the two options. If you have to take this route, avoid debt settlement companies to save yourself both money and time. Additionally, aim to settle debt which has already been sent to collections, not current debt. Be prepared to pay the entirety of the lump sum settlement amount once you reach an agreement with creditors.
If you are considering filing for bankruptcy, contact AM Law. Our attorneys can help you find effective alternatives to bankruptcy. Call today to speak with a trusted advisor who can help evaluate your options.