If filing for bankruptcy has been recommended to you as a possible solution for your debt troubles or if you are considering filing for bankruptcy yourself, you should be aware that there are many other options available to you. While bankruptcy may, indeed, end up being the best choice for your particular situation, it is still vital that you understand all the other courses of action you may choose. In general, bankruptcy should be thought of as a last resort and not as a first choice, since it can have long lasting consequences and implications that you may not be aware of.
The simplest way to avoid bankruptcy is to pay your bills on time or work out solutions with creditors and not get into debt in the first place. It is likely, however, that you would not be reading this article if you weren’t already in over your head. If this is the case, you may still be able to prevent the situation from worsening to a degree that would require bankruptcy as a solution. You can do this by curtailing spending habits, eliminating unnecessary expenses, and trying to work out payment plans or other options with your creditors. If you have already done this or if your situation has progressed past this point, do not automatically assume bankruptcy is the right choice.
Debt consolidation is one of the most common ways that debtors avoid bankruptcy. This is accomplished by acquiring a very low interest loan from a lender, usually your bank. While it may seem counterintuitive to take out another loan when you are already struggling, you must understand that the purpose of this loan is to be able to pay off all of your debts in full. Once you have done this, you will only have to make one payment – the payment to the bank or other institution that has given you the loan. Since this will be low interest and since you will not be dealing with several creditors at once, this can make getting out of debt much easier. If you are unable to acquire this loan on your own, you may be able to do so with the help of a co-signer or by going through an organization that specializes in helping those with poor credit.
If you have tried talking with your creditors in the past, as mentioned above, but have not had any luck working out a plan, you might want to consider having a “formal proposal” written up. This proposal is a great bankruptcy alternative that will change the terms of the initial loan and make it easier and more realistic for you to pay off. This might be accomplished by changing the amount of each payment or by extending the amount of time in which you have to pay off the full amount.
These are only a few of the various bankruptcy alternatives out there. In fact, there is an entire organization, the United States Organization for Bankruptcy Alternatives, that can help you find a different solution. If, however, you cannot find another viable option, then you may have to turn to bankruptcy. Though this should, as previously referenced, be a last resort, it does not mean that your credit will be ruined forever or that you are making the wrong decision. It’s all about doing what is right for you and your situation, and that will be different for everyone.