Alternatives to Bankruptcy
While bankruptcy has helped millions get out of debt, it's not right for everyone.
If you can't pass the Chapter 7 means test, or if you don't have consistent income to get on a Chapter 13 repayment plan, you may want to explore other debt relief options.
If you're unsure about which debt reduction offer might be best for you, you can always talk to a bankruptcy
lawyer for free. Fill out the below form to speak to an attorney about your options today.
What Are Some of Possible Alternatives to Filing Bankruptcy?
Some alternatives to filing bankruptcy that may help you with your debt include:
Paying The Bills
This may apply if you are not facing an immediate financial crisis and if you have the time to adapt “make more/spend less” techniques like getting a second job and living with in a budget. Paying your bills and not filing bankruptcy would allow you to avoid the possibility of a bankruptcy being on your credit report for 10 years and may even allow you to negotiate with creditors for lower bills; on the other hand, this approach does not give you the protection of bankruptcy’s automatic stay, especially if your finances have taken a sudden hit due to an unexpected emergency, job loss or illness.
Negotiating with Creditors
You may be able to negotiate new repayment plans and lower interest rates with your creditors, thus giving you the feeling as if you have more control of your debt. On the other hand, do you have the skills to negotiate with creditors and do you feel comfortable doing this?
Getting a Debt Consolidation Loan
By consolidating all of your debt into one loan and typically using your home as security for the loan, you may be able to get a lower interest rate and monthly payment than you had on your other debts. Yet, if you can’t make payments on this debt consolidation loan, you could lose your house as it is collateral. Furthermore, you may end up paying more money in the long-term, depending on your interest rate and the length of your repayment period.
Working with Credit Counseling Agencies
The agency may be able to help you negotiate and get a new repayment schedule for your debts, thus possibly putting an end to collection calls and giving you a working time period to satisfy your debts. Some pitfalls to consider include the fact that not all credit counseling agencies are honest (you can check reputable credit counseling agencies at the U.S. Trustee Program Website), and that you would lack the protection of something like a Chapter 13 bankruptcy if you were not able to make payments for whatever reason.
A debt settlement firm may act as a middleman between you and your creditors, and possibly get you major reductions in your debt. However, some debt settlement firms are quite shady and may leave you with bigger headaches (owing more money, damaging your credit score, etc.) than before you started working with them. Learn more about debt settlement.
This may seem a bit strange, but if you live a simple life and have few assets and little income, there may be no point in filing bankruptcy. For most people, though, this is not a very practical solution. Doing nothing is generally not advised, especially if you don’t live the simple life. Such lack of action could result in even bigger problems, including liens on your home and car and more damage to your credit report.
So Where Do You Go from Here?
When addressing your finances, it can only help to know of all your options. With that said, coming to a responsible decision may not be the easiest choice, thus making it worth your time to speak with a bankruptcy lawyer who can examine your situation and options in more detail.
Set the wheels in motion to take control of your financial difficulties by getting in touch with a bankruptcy attorney.Learn how to file for bankruptcy and the ins and outs of the other bankruptcy alternatives, then make your decision.
The above summary is not legal advice. Laws may have changed since our last update. For the latest information on bankruptcy laws, speak to a local bankruptcy lawyer in your state.