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There are several possible alternatives to bankruptcy for
those in financial trouble.
It is important that
when debtors consider these options they investigate the
organizations they are dealing with and make sure they do not
do anything that places them in a worse situation. Some bankruptcy
alternatives might have an impact on a subsequent bankruptcy
filing.
The main alternatives are out-of-court
settlement with creditors, debt counseling services, and
debt consolidation loans.
Out-of-Court Settlement
Rather than file bankruptcy, one may consider
settling your unsecured debt at a reduced amount. It is
unlikely that an individual could do this independently
but there are companies that will help you negotiate with
your creditors. Is is important that these negotiations
are handled properly and the consumer should seek professional
help. As in all these actions there can be a negative effect
on one's credit rating.
Debt Counseling Service
Debt counseling services can be
a good start in helping you deal with your financial
difficulty. They can
consolidate your monthly payments and obtain
payment
or interest reductions on your unsecured debts. The only problem
with debt counseling is that many people are in such financial
trouble that they will not qualify for debt counseling
because they will not be able to repay their debt even
under the better terms. And again this option could have a signifcant negative impact on your credit rating.
Debt Consolidation Loans
Another option is borrowing against the equity in one's home
to pay down credit card debt. This of course requires home
equity and a careful consideration to make sure you are
not putting yourself in a worse position. Not being able
to pay your home equity loan could put your home in danger leave you in a worse
position than not being able to pay your credit card debts.
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