Dealing with Debt

Avoid Filing For Bankruptcy With These Helpful Alternatives

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The economy is tough right now. Unemployment rates are high, and the cost of living continues to rise. With these economic factors in mind, many people are worried about their finances. When you cannot make ends meet day after day, it can be frustrating to have no control over your financial future. This may mean that filing for bankruptcy may seem like a logical solution to those who feel they have reached rock bottom.

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, some other options 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.

Suppose you’ve gotten into debt and you’re facing the pressure to pay your creditors immediately. In that case, you might be looking for the easy way out, hoping to stop the collection calls and potential threats of lawsuits from your creditors. However, a common myth is that filing for bankruptcy will make all of these problems disappear. It could actually make them worse because while it can stop some debt collections, it won’t prevent others, and you’ll also suffer significant damage to your credit that can take years to recover from. Therefore, it is better to explore ways to avoid bankruptcy FIRST, even if it means giving up things you do not necessarily want to.

Here are a few helpful bankruptcy alternatives:

1. Take a free 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. Often, 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, make more income, 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. Still, 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 is never fun to make sacrifices, but they’re essential to getting out of debt. You may discover you can make some permanent lifestyle changes while going through this period. By monitoring and making adjustments to your monthly budget, you can reduce the amount of money that goes out.

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Create a savings plan now so it will be easy for you when tough times arise. Set aside as much as possible each month in an emergency fund or other type of account (such as a retirement) where you cannot easily access the funds needed for an emergency.

However, if saving money is not possible at this time, you can still avoid bankruptcy by taking out a low-interest loan to cover more pressing debts and paying it back as soon as possible. This will help improve your credit score while keeping the creditors happy since they get their payment on time or earlier than expected.

3. Consolidate debt with a low-interest 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. However, 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. If you don’t have good enough credit, you probably won’t qualify for a loan. 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 to work something out – 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. Every creditor has different payments and interest rates; some even allow payment plans to waive specific fees depending upon your financial situation. Be honest about your current status and see what is offered before filing for bankruptcy.

If you owe a lot and you can’t get it all paid off, 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 out a payment plan that benefits you both. You still will probably have to make those sacrifices to get the payments made and on-time.

5. Consider getting a HELOC 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 AdvantageCCS:

Sometimes when all else fails and your creditors still won’t stop the collection calls, a debt management plan at a credit counseling agency like ours may be the best alternative to bankruptcy. The idea behind the debt management program is to help people in debt change their habits and learn how to use a budget. You just need to make sure you’re working with a reputable non-profit credit counseling agency like AdvantageCCS since there are many scams out there.

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 trusted non-profit credit counseling agency 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 also offer Pre-Filing Bankruptcy Counseling and Pre-Discharge Bankruptcy Education classes. Both are required by law to be completed so you can obtain your necessary bankruptcy certificates. We are approved by the Executive Office of the United States Trustee to issue certificates in compliance with the Bankruptcy Code.

Author: Lauralynn Mangis
Lauralynn is the Online Marketing Specialist for Advantage CCS. She is married and has two young daughters. She enjoys writing, reading, hiking, cooking, video games, sewing, and gardening. Lauralynn has a degree in Multimedia Technologies from Pittsburgh Technical College.