If you are in a financial situation to where you are considering filing for bankruptcy, it is essential that you explore all of your other options first. While bankruptcy is an appropriate choice for some, it should always be the last resort. There are alternatives to bankruptcy that are highly successful for many people, and knowing what these alternatives are allow you to make the best decision for your financial future.
Liquidating Assets – Coming up with (legal) means to obtain quick cash has saved many people from having to file for bankruptcy. Selling a car, selling stocks or bonds that have a significant value, or selling a boat or other type of recreational equipment that can quickly bring in substantial cash gives you money in hand. Liquidating your assets allows you to have money to pay off your debts quickly and easily. While it is often difficult to part with certain things, it is better than losing them altogether through bankruptcy.
Debt Counseling / Credit Counseling – First, it is essential that you do your research and choose a legitimate company that offers free debt counseling to consumers who want to get out of debt. Second, it is essential that you are committed to getting out of debt, otherwise this option will not work. Debt or Credit Counseling works with you to create a debt management plan. With this plan, you make regular payments to the credit counseling company, and they then make payments on your behalf to the creditors. This option provides convenience, typically lowers credit card interest rates, waives late fees and over limit feeds, and it stops collection activity.
Debt Settlement – Those with a severely delinquent debt may be able to find success in negotiating with creditors to pay less than you actually owe. This allows you to save money. However, the disadvantage to this option is that your credit report will show that you paid less than what you owed (what debt you actually incurred). In many cases, you will also pay taxes on the forgiven amount because it would be viewed as revenue. This option is not for the weak at heart because debt settlement companies often charge high fees and offer no guarantees.
Debt Consolidation Loan – A debt consolidation loan lumps all of your debts into one loan in order to eliminate the hassle of paying several creditors. People who have equity in their home often take out a home equity loan to repay unsecured debts. However, this is a risky option because if you do not pay your loan, you can lose your home.
Lifestyle Changes – Often the most successful bankruptcy alternative is one that many people choose to ignore. Lifestyle changes require you to make sacrifices now in order to promote success in the future. Live within your means; sell your over-sized home for one you can easily afford and use money from your sell to pay off debts; start a strict budget and stick to it; learn to live with just one car in your family; forgo vacation. You cannot keep living the same lifestyle and expect to miraculously get out of debt. It takes commitment and will-power to keep a tight rein on your spending, and it takes making tough choices now to help you avoid bankruptcy.
If you have questions about bankruptcy, Gingold & Gingold, LLC, offers a free initial consultation to learn more about your specific situation. We can advise you whether bankruptcy is right for you or if an alternative solution is the ideal choice.