Many people find themselves on a debt treadmill they can’t ever seem to get off of. In some cases, filing bankruptcy may be the only option, but others may be better served through alternatives to bankruptcy. Alternatives usually include some form of debt repayment, along with credit repair and a renewed understanding of how to use credit, but these alternatives take many forms. Consulting a bankruptcy attorney will help you better understand the options, so you can decide which one is right for you.
- Debt Consolidation – If you are struggling to keep up because your monthly payments are too high, but you still have good credit, chances are you can qualify for a debt consolidation loan. This may be a personal loan, home equity loan, or student loan consolidation program. This will help make payments affordable, and keep you out of credit trouble.
- Payment Arrangements – If you only have a small number of creditors, you can contact each one and ask to make payment arrangements. If you tell them about your situation, you may be surprised to find how many are willing to work with you. Ask for a reduced interest rate and reasonable monthly payment amount, and don’t fall behind once you’re on payment arrangements, or you could wind up in court.
- Debt Settlement – There are many for-profit and not-for-profit debt settlement companies out there, but you can also enter debt settlement yourself. Similar to the payment arrangements option above, you contact your creditors and let them know you’re having difficulty keeping up. You can ask for smaller monthly payments, but you can also offer to settle with the company for less money than you owe. They don’t have to accept your terms, but they might prefer to get something than risk getting nothing if you file bankruptcy.
No matter which option you choose, your credit record will probably be damaged. To make sure you know what’s on your credit report, request a copy every year. Review it thoroughly and fix any errors. As you get better at reading and understanding your credit report, you’ll start managing your credit better, too. Ideally, in the future, you can avoid the need for bankruptcy altogether.