Avoid Bankruptcy with These Bankruptcy Alternatives

Bankruptcy can cause both economic and emotional devastation. Most bankruptcies are granted, but it isn’t intended to be an easy way out of your debt. Bankruptcy will most likely result in extensive damage to your credit and long-term economic issues. Explore any and all other alternatives before making the decision to file for personal bankruptcy.

Some bankruptcy alternatives may impact subsequent bankruptcy filings if the alternative route does not work, so make certain you investigate the organizations you deal and make sure they don’t do anything to worsen your situation.

Debt Consolidation

Most people have multiple payments that they must make every month, such as high interest credit card bills, car loans, a house mortgage and medical bills. When you add them all up, it often seems an insurmountable task to get out of debt.

If you have equity in your home (or some other real estate), you can take on a first or second mortgage and use that money to pay off your other debts. In most cases, you should be able to significantly reduce your monthly payments and perhaps avoid bankruptcy altogether.

Be very careful if you choose this method. There’s no point in consolidating debts if it won’t make a significant difference in your ability to pay. Consolidating unsecured debt under a home mortgage will make the entire debt secured and bankruptcy wouldn’t do you a bit of good. Not being able to pay your home equity loan could leave you in a worse position than not being able to pay your credit card debts.

To find out more about debt consolidation and whether or not it’s right for you, request free information:

Renegotiate Secured Loans

Secured loans, such as for your car or home, are generally the largest debts that most people have. But filing bankruptcy will not reduce or terminate these debts.

If your debt hasn’t completely caught up with you and destroyed your credit, you may be able to renegotiate these loans with your creditors or take the loan elsewhere.

For example, if you have a home loan that is several years old, you may be able to reduce your interest rate significantly. Depending on your principal balance and current terms, your payment could decrease by several hundred dollars per month. You can then use that savings to pay other debts.

If you only have a few years left on a mortgage, you may also be able to extend that loan over a longer period and reduce your payments even more.

Debt Deferment

Rather than lose a good customer (and his money!), some merchants may be willing to let your debt sit and collect interest while you pay your other bills. Few secured loan holders will comply because they generally have nothing to gain, but other merchants may be more willing.

Renegotiate Unsecured Loans

Some merchants are willing to reduce or even eliminate any interest in order to let you pay off your entire debt load. Once they know that they could potentially lose it all if you file for bankruptcy, you have more room for negotiation. This could result in them terminating your credit, but it may be worth it to avoid the extra cost of the interest.

Interest Debt Reduction

Credit problems are often due to extensive interest that has accrued on the original balances. Creditors often carry this interest separately and you may be able to negotiate part or all of this credit away.

You’ll have a tough time trying to negotiate the principal balance, but creditors are typically more willing to negotiate on the accrued interest because it isn’t reflected in the books the same way.

Professional Debt Negotiation

Negotiating on your own can be a massive undertaking, requiring a great deal of emotional stamina and aptitude, especially when dealing with creditors who will sometimes use the opportunity to harass or intimidate you.

Debt negotiation companies can do much of the work for you by developing your case and presenting it to the creditors. Since your negotiation company has no personal involvement, discussions focus on resolving the business relationship, creating an amenable atmosphere where solutions can be reached.

Volunteer Organizations

Do some research to see if your community has any volunteer organizations that can do some of this negotiation for you. This might be a good choice if your debts are relatively small and few. They may limit the extent of their involvement, but often help seniors in negotiating payment plans with telephone and utility companies.

Debt Reduction Attorneys

You should probably seek legal help from an attorney that specializes in debt reduction if your debt load or asset level is high or varied.

Debt reduction attorneys have are skilled and experienced in working with creditors. When your attorney calls on your behalf, the merchant is much more likely to take such discussions seriously.

A debt reduction attorney will also review any contracts you may have. Most contracts include a lot of legalese and are difficult to understand. Your attorney will make sure that you are taking full advantage of any contractual provisions and make sure that all the provisions are legal. Illegal contract provisions can be renounced.

A good debt reduction attorney will also become very familiar with your case. This is useful if other actions must be taken, reducing redundancies.

A local bankruptcy attorney can help you understand the differences between Chapter 7 bankruptcy and Chapter 13 bankruptcy, so that you can make an educated decision about the best next step for you. Fill out the form below for a free bankruptcy case evaluation by a local attorney.