While filing for bankruptcy may be an existing option, there are also alternatives to consider that won’t leave you with the same harsh consequences filing for bankruptcy would. Alternative options may also be a better fit for your circumstances, anyway, as a creditor might tell you. Keep reading to find out more about bankruptcy alternatives you could consider.
Debt Consolidation as Alternative to Bankruptcy
One great bankruptcy alternative is consolidating your debt into a single monthly loan payment. This is typically a much simpler option, as you won’t have to worry about meeting due dates on several different payments. There are also other ways to utilize debt consolidation in your favor—such as transferring your debt over to a balance transfer credit card with 0% APR, or consolidating into a home equity line of credit. Speaking with your creditors could help you choose the best method for your situation.
It is possible that creditors may also lower your payments to fit your reasonable budget if they feel that you have no other options. In the end, it’s easier for them to work with you on lower payments than to deal with the high court costs during a bankruptcy.
Credit Counseling as Alternative to Bankruptcy
Negotiating with your creditors can be difficult, so working with a credit counseling agency could take some of the stress off your shoulders. A credit counselor may be able to work out a repayment plan with your creditors based on your budget and earnings. When an agreement is made, you would make one payment per month to the agency—who then, in turn, pays money to your creditors until the debt has been paid. These plans may come with some disadvantages, though. If you miss a payment, the whole plan could be cancelled, sending you right back to where you started.
Defaulting on Your Debt
Although perhaps not the best option, some choose to simply avoid paying their debts and waiting for them to default. They choose to only do this if they don’t own any valuable assets, however, creditors could attempt to come after them through court. If the creditor has no reason to believe you’ll pay off your debt, though, it is unlikely that they would fight for you to pay it.
In these situations, it is likely that the creditor will begin to use harassment as a method to retrieve payment from you. There are, however, laws that prohibit them from using certain methods. If you know your creditor has violated these regulations, you may be able to seek financial damages in court. In the end, defaulting on your debt will stay on your report for seven years, but it could still be a viable option to consider as a bankruptcy alternative.
If you have recently considered filing for bankruptcy to get out of your financial struggles, you should know that there are plenty of other, better options to consider as alternatives to bankruptcy. Bankruptcy could potentially make your situation much worse in the long run. By considering alternatives, you could save yourself a lot of trouble in the future and potentially even save more money.