Bankruptcy Alternatives

Being in debt can be overwhelming. Many people get to a point where they feel that the only way out of their situation is to declare bankruptcy. However, bankruptcy is not the only solution for those in debt.
 
Bankruptcy Fact
While bankruptcy will clear you from having to pay most creditors now, it can also make it extremely difficult for you to borrow again in the future and can be very damaging to your credit.

Bankruptcy lawyers and the cost of filing for bankruptcy may even unnecessarily add to your financial problems. The first step to getting yourself out of debt is to seek bankruptcy help. Bankruptcy help can come in many forms. Assessing your situation, making a budget for yourself and working hard to clear debts can be a far better option than declaring bankruptcy.

The following can be great bankruptcy alternatives:

  • Borrow money. Whether from your savings account or from friends or family, borrowing money can help save you from having to declare bankruptcy.
  • Call your creditors. They may be able to help you by coming up with an alternative payment plan.
  • Credit assistance. Credit counselors can help you make a plan to avoid bankruptcy and can even assist you with getting better interest rates and payment plans.
  • Debt consolidation. Debt consolidation loans can help you pay off your credit cards more quickly.
  • Refinance. Talking to a loan officer about refinancing a car or home loan can open up extra cash and save you a lot of money.
  • Transfer balances. Put any balances that you have on credit cards on the card with the lowest interest rate.

Any one or combination of these options can be helpful bankruptcy alternatives.

Our articles cover all types of bankruptcy alternatives and provide the advice and information that you need to avoid having to file for bankruptcy.

Debt Consolidation

One bankruptcy alternative is debt consolidation. Banks and other lending institutions may offer debt consolidation loans to borrowers to help them pay off their credit card debt.
 
Debt consolidation essentially combines all of your debts into one. Once you have consolidated your loans, you will then only have to pay back your debt consolidation loan, which will most likely have a lower, more manageable interest rate and monthly payment than credit card bills. However, you must still be creditworthy to qualify for debt consolidation.

Creditor Negotiation

Another bankruptcy option is creditor negotiation. As the term implies, creditor negotiation involves negotiating better rates with your creditors. The way to do this effectively is to be straight with creditors. Explain your situation calmly, rationally and in a detailed manner and they will most often be willing to work with you and help you find a solution that will work for both you.
 
Alternative payment plans for those considering bankruptcy are often available through creditor negotiation.

Outside Agency Payment Plans

Credit assistance programs and outside agency payment plans offer many services to those considering bankruptcy. Interest rates can be lowered or eliminated, payments can be lowered, late fees can be waived and credit counseling can be given through outside agency payment plans.

Resources

Care One Credit Counseling (2007). Bankruptcy is Not the Only Way Out. Retrieved December 12, 2007, from the Care One Credit Counseling Web site: http://www.careonecredit.com/Knowledge/alternatives-to-bankruptcy.aspx.