BANKRUPTCY ALTERNATIVES
Before filing for bankruptcy you need to ask yourself; is there any other way to solve my financial problems? Some bankruptcy alternatives to consider are debt consolidation loans, consumer credit counseling service, or negotiating easier payment terms with your creditors. The alternatives that you use will depend on your own specific situation.
If you are a homeowner a home equity debt consolidation loan may work for you. Some lenders now will lend up to 125% of the value of your home. This option works well if you have excessive credit card debt and in some cases car loans can be included too. You will use the money from your home equity loan to pay off in full as many of your other obligations as possible.
The goal here is to have one manageable monthly payment instead of the many monthly payments that you could not keep up with before. Ideally your debt consolidation loan should be at a lower interest rate and have a longer repayment term as compared to the debts that you want to consolidate.
A word of warning is in order here. Once you have consolidated your debts you must change the bad spending habits that forced you to take this action in the first place. Running up your credit card balances again now that they have been paid off will only get you into deeper financial trouble, possibly leaving you no choice but filing for bankruptcy. Cancel all but two of your credit cards and use those only for emergencies.
Consumer credit counseling services are also available as a possible alternative to bankruptcy. These services in most cases are non profit organizations that will appraise your current financial situation and make recommendations on how best to remedy your financial problems.
Your own personal credit counselor will review every aspect of your financial condition. You will be required to provide documentation of your income, your assets, your current and past due debts, all correspondence from your creditors and anything else that pertains to your financial situation. If your situation is not too severe the counselor will then recommend the specific steps you will have to take to solve your problem.
If the counselor feels that your situation is too severe for you to be able to remedy yourself a debt repayment schedule will be put into effect. The counselor will inform your creditors of your financial situation and of the proposed repayment schedule. When your creditors agree to this schedule you will begin making monthly payments into a special trust fund at consumer credit counseling services. These monthly payments are then divided up and sent to your creditors. This process continues until all your debts are satisfied.
Finally, quit avoiding your creditors and talk to them! Sending you to collections or repossessing your car is the last thing they want to do. Most creditors will work with you as long as you are upfront and honest with them.
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