Are there any alternatives to bankruptcy?
To many Bankruptcy is complete financial ruin and many are looking for good alternatives to bankruptcy, so depending on your situation there may be alternatives to bankruptcy, so let’s examine a few.
How bad is your debt?
If you are in a situation where you are considering bankruptcy it must be bad. But, just how bad is a good question to ask yourself. Mentally stop running from the problem. I say this because it’s extremely common for folks not to open letters or bills because they just feel they can not deal with them. However, this action could cost you greater issues such as legal action.
The best way to get temporary breathing room to avoid bankruptcy
If you need temporary breathing room take immediate steps, to be honest with yourself about your situation. Find someone who can help you look at all your bills, debts, and living expenses in a realistic manner. It can be painful but very needed to accept where you are at. But, potentially with a lot of effort, you could avoid bankruptcy if you have not ignored things too long. The sooner you stop ignoring the problem the sooner you have the potential to fix it.
You may want to meet with a friend or relative who is good at budgeting or if you do not have one find a good financial advisor who can assist. Some churches even offer a minister who is trained to do this. Let them look at all your income and your bills to see exactly what funds are available for your debts. It may be possible with some gifts from friends and relatives for you to get out of your immediate problem but you will have to make some long-term adjustments. It’s often said it’s easier to get into debt than it is to get out of debt. Likely you will need to add additional real income to your household often you can do this with a 2nd job or freelance work like Lyft, Uber, Doordash, Fiverr, or others. I say real income because these are not times for get-rich-quick schemes or additional bad ventures. You need something that will put money in your bank account now. Let’s for a moment say you are behind that we can be dealt with but it’s important to see the difference in what payments are needed to make it each month.
If there is say a $400 shortfall that may seem terrible but it is possible in many cases to cover that additional expense monthly with very good work ethics and determination. The next is dealing with where you are at today! Those late statements, letters and threats of lawsuits often can be dealt with with good communication.
The lender really does not want you to default fully on your debt. Most will help you if there was a good and often temporary reason for your financial ruin. You can call them and/or write them stating due to a bad situation leads to you getting a little behind or a little overwhelmed. You can even ask can they waive any portion of the debt and especially late fees and penalties. You may ask if they can reduce your payments for say a 6-month or 12-month period to allow you time to catch up on your financial situation.
Bankruptcy does cost you both financially, and emotionally and will impact your credit however these things may not be able to be avoided given your personal situation. It may be worth meeting with a bankruptcy attorney nearby to help you determine what would happen if you filed for bankruptcy. This is often said to be the easy way out but keep in mind for years to come it will make your life much harder so if you can avoid this then you should. I had a family member who missed out on refinancing their home a big part of their financial challenge because they were in bankruptcy while rates dropped to their lowest in history. As they came out of bankruptcy the rates had now gone up more than what they were currently paying. It turns out that in the past they could have to take a loan out of their retirement account for temporary relief and likely negotiated with lenders. Yes, they would have had damage to their credit but either way that would have happened. The lawyer would be better served to send letters to some creditors to reduce or waive fees. In some cases, they were paying penalty interest rates that potentially could be reversed.
Bankruptcy Alternatives debt Settlements
One bankruptcy alternative is debt settlement. You may want to look into debt settlement. It can be a great option for you to move forward if your debt becomes unmanageable to continue paying. There are many similarities between debt settlement and bankruptcy.
So, what is debt settlement? Debt settlement is when an individual is able to negotiate to lower your debt “less than what you originally owe”. That way a portion of what you were supposed to pay back will be forgiven by the lenders. For example, if you owe in debt $ 175,000, debt settlement is able to negotiate the amount down to say $87,500. Though how does the process of debt settlement and then you will make payments based on this. Most often these are combined into one payment by a local debt settlement organization that sets a total reduced amount for you to pay them and that includes their fee and they pay your lenders from this payment.
Similar to debt settlement Debt management is a more aggressive version of debt settlement as the organization is often a financial advisor and can assist with budgets. They will not only negotiate and set a payment like the above but work aggressively with you to resolve the items that lead to your financial situation in the first place.
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