Living with any type of financial hardship is one of the most difficult things that a person has to deal with. Unfortunately, it is something that most people have to do at some point in their lives. However, there is a huge difference between having a temporary financial roadblock as opposed to dealing with long-term shortages of funds and serious debt. The latter can make it almost impossible to do things that most people take for granted, like having a roof over one’s head or eating healthy meals.
When people have to live this way for long periods of time, the stress can easily become so overwhelming that it is practically impossible to function normally, even in a day to day sense. This forces many people to contemplate filing for bankruptcy. Nevertheless, there are some other options that should be considered before anyone chooses to file for bankruptcy. In fact, that should be the last choice that a person makes in their attempts to regain some control over their finances.
If you’ve gotten into debt and you’re facing the pressure to pay your creditors immediately, you might be looking for the easy way out hoping to stop the collection calls and potential threats of action your creditors say they’ll take against you. It can certainly be aggravating to hear your phone ring throughout the day and intimidating when you hear the voice on the other end tell you they could take you to court and potentially seize your personal assets such as your car or home. But a common myth is that filing for bankruptcy will just make all of these problems go away. It could actually make them worse because while it can stop some debt collections, it won’t stop others, and you’ll also suffer major damage to your credit that can take years to recover from. So, it’s better to explore ways to avoid bankruptcy FIRST even if it means giving up things you don’t want to.
Here are a few bankruptcy alternatives:
1. Take A Free Online Credit Counseling Session – One of the first things that a person might consider doing is obtaining free credit counseling services from a reputable non-profit credit counseling company. Many times, these types of companies will help a person with credit counseling that occurs before or maybe even at the same time that they are helping them consolidate their debt with a Debt Management Plan. The whole idea behind it is that people can get relief through a Debt Management Plan that will help them stave off the creditors and prevent additional collection activities, while simultaneously giving them a single payment to pay every month that is lower than what they were originally paying because of reduced interest rates. It can make it easier to pay off debts and it makes it easier to manage finances from one month to the next.
2. Sell Assets, Take Another Job, And Cut Expenses – Since you don’t want your creditors seizing your home, or if you’re renting and you need to avoid eviction, you should start selling everything that is not essential. That will mean most electronics, some appliances, and possibly even selling and downgrading your vehicle. You’ll probably need to take on another job and eliminate entertainment and luxury expenses for a while, but it’s one way you can start paying down creditors and avoid bankruptcy that won’t last forever if you work hard in the short-term. It’s never fun to make sacrifices, but they’re essential to getting out of debt, and you may discover you can make some permanent lifestyle changes while going this period.
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3. Consolidate Debt With Another Loan – A person may consider looking into getting a home equity loan. Provided that the home is paid off, or even that the majority of the original note is paid off, it may be possible to get a home equity loan in order to pay off high-interest rate debts. In many cases, this can help a person avoid the necessity to file for bankruptcy, and allow them to get back on track when it comes to their finances. In addition, this is far less damaging to a person’s credit report and it can help them in many aspects of their life, not just helping them avoid filing for bankruptcy. It can help them create an emergency savings fund for the future, so they don’t have to rely on credit cards.
Not everyone qualifies for this, nor should everyone do it because those who don’t have a real change of spending habit going into it will only find themselves in debt that they don’t have a way to get out of. But if you do have the right mindset going into it and you qualify, debt consolidation can be one of a few bankruptcy alternatives to use. What it will do is using either an unsecured or secured loan, you’ll have all of your current debts paid for by this loan, and then you’ll need to pay it off over time. If you don’t have good enough credit, you probably won’t qualify for an unsecured loan and you’ll probably need to use a home equity loan or line of credit for this. You should concentrate on paying off debt consolidation loans as quickly as possible to avoid paying high-interest rates over time.
4. Contact Your Creditors And Try to Work Something Out – Sometimes, simply contacting a company directly can help a person avoid bankruptcy. For anyone that is having problems paying off one or two accounts, it may be possible to contact those creditors directly and work out some type of payment plan. It is something of a long shot, but sometimes it pays off to try it. As they say, “It never hurts to try!”
If you owe a lot and you can’t get it all paid off at once, creditors can be willing to negotiate payment plans with you so that you can pay them down in manageable increments. Not all will, but some will be willing to consider your situation and work a payment plan out that benefits both you and them. You still will probably have to make those sacrifices to get the payments made, but it is also possible they’ll reduce the original debt down so that your payments don’t drag on.
5. Consider Getting A Second Mortgage Or Reverse Mortgage – If ALL of that fails to work, a couple of additional options to consider are a reverse mortgage or a second mortgage. If a person can really use these techniques to get out of debt and put themselves in a better financial position down the road, it might be worth doing. You are putting your home “on the line” literally with this option so it’s not to be taken lightly and should really be researched and checked out before considering this as an option. It can have serious consequences if you default or keep racking up more debt.
Why You Should Try To Avoid Bankruptcy:
Bankruptcy is a scary thought. While it is sometimes an effective solution to debt, it can have dramatic implications on a person’s credit rating for up to a decade after it has been filed. Therefore, a person should only file if it is absolutely necessary. Other options should be considered first.
For many people who are trying to manage large amounts of debt, avoiding bankruptcy is a top priority. Debt can be in the form of medical bills, mortgages, credit cards, and loans. When these debts pile up upon one another, the results can be crippling, especially if the debtor suffers a job loss, a divorce, or an illness. Sometimes it can seem that filing for bankruptcy is the only option to get out from under the mess.
For some people, bankruptcy may be their only option, but if you don’t have millions of dollars of debt, there may be alternatives available to help you repay your debt, maintain your credit score, and prevent future problems. A non-profit credit counseling agency like Advantage CCS hires experts who are able to guide their clients in the best possible ways to reconstruct their finances and get them out of debt.
Advantage CCS works with creditors to help clients work out a satisfactory repayment plan called a Debt Management Plan. They can lower monthly payments and help your credit score increase over time as you pay down your debt. They also work with clients to help them learn to properly budget their finances, keeping them from getting into debt again in the future.
Bankruptcy can result not only in a damaged credit score, but accounts can be frozen and interest can continue to accrue until a court ok’s your bankruptcy filing. With recent regulation changes, filing for bankruptcy is not as easy as it once was, and there is never a guarantee that a person will be allowed to file. Waiting several months for a judgment on your bankruptcy while not paying any bills can create an even bigger financial mess.
Discover Bankruptcy Alternatives with Advantage CCS:
Sometimes when all else fails and your creditors still won’t stop the collection calls, a debt management program at a credit counseling agency like ours may be the best of your bankruptcy alternatives. What this program will do is help you start figuring out what you need to do to organize your debt payments, and if necessary will have your creditors deal with the agency directly so that you don’t have to face the burdens of collection calls. The idea behind the debt management program is to help people in debt trouble change their habits and learn how to use a budget in the future. You just need to make sure you’re working with a reputable debt counseling agency since there are many scam companies out there as well as debt settlement companies who do not honor what they say they will do.
Advantage CCS can work with clients to help them repay their debts. They may recommend that a client contact a bankruptcy attorney if the situation is very dire and the individual has no other options available to them, but it would be wise to know all the alternatives before resorting to a bankruptcy filing.
If you are suffering under massive debt that you can’t repay, contact Advantage CCS today. Certified credit counselors are available online, by telephone or in person. Advantage CCS is a national non-profit credit counseling service which means that the priority is the client, not the company’s bottom line.
Know all of your options before you decide to file bankruptcy. You may be surprised at what you discover. If you decide to file for bankruptcy, we offer Pre-Filing Bankruptcy Counseling and Pre-Discharge Bankruptcy Education classes. Both are required by law to be completed so you can obtain your bankruptcy certificate.