Bankruptcy sometimes is the right solution to overwhelming debt and financial burden, but it’s not the only option. Therefore, it’s important to consider all options, including the pros and cons, before proceeding with filing for bankruptcy.
For instance, bankruptcy has consequences that can impact you for years. A Chapter 13 bankruptcy will be on your credit report for 7 years and a Chapter 7 will remain for 10 years. And you are more likely to have higher insurance rates.
Additionally, bankruptcy can make it harder to obtain loans with reasonable rates and impact your employment. For instance, bankruptcy can interfere with some jobs that require security clearance. If you’re a homeowner, you could lose your home to foreclosure. Therefore, you may want to consider debt relief alternatives before filing.
Debt settlement
One alternative is attempting to negotiate with your creditors without involving the courts, such as through debt settlement. For instance, if you can’t make your mortgage payments, you could call your loan servicer to discuss options other than filing for bankruptcy, like forbearance.
You could also work with a certified credit counselor to devise a plan to restructure your debt. This can allow you to repay your debt gradually without involving the courts and any consequences of bankruptcy.
Debt settlement options can often allow you to reach an agreement with creditors where you pay less than what you owe. You can select a debt settlement company or do it yourself. Typically for this to work, you must be in default.
However, before hiring a debt settlement company, research their track records and don’t use companies that require you to pay a fee upfront.
Debt consolidation
Debt consolidation can allow you to save on interest and consolidate your payments so you’re not paying multiple bills each month. For this to work, you’ll need to obtain a credit line or loan that will let you pay off your debts, like a personal loan or home equity loan.
While you can do this yourself, you may want to consult with a qualified credit counselor or financial advisor before consolidating to ensure it’s the right choice for you.