Unfortunately, credit card debt has become a way of life for many Americans. Are you considering filing chapter 7 or 13 and trying to find a way to avoid bankruptcy? The tragic truth is that many consumers feel the only way out is bankruptcy and needlessly file what was, in many cases, totally avoidable. Because a bankruptcy filing can have such a destructive impact on your credit score, it’s much better, when at all possible, to seek other alternatives before filing Chapter 7 or Chapter 13 bankruptcy. If you are able to find a solution to resolve the debts, avoid bankruptcy, and save money and impact your credit less negatively than a bankruptcy, it’s better to take it, even if it will take longer or cost more to get rid of your debt.
Re-Pay Your Way Out of Debt
When looking at debt, and trying to avoid bankruptcy, the process can often feel overwhelming. It is important to remain calm and to think clearly and objectively about the situation; try and remove the emotional factors. For example, you must ask the question, can you afford to pay off your debts over a period of time? In the short term, it may seem like you simply can’t afford your debt; however, in many cases, a second opinion or another set of eyes may be able to help you find some extra money to re-pay debts and avoid bankruptcy. A great place to begin is the extras that just are not necessary. Fro example, do you have cable television with all the extra channels or the latest cell phone? To that point, do you have a cell phone and a home phone? If so, one of these expenses can be removed and save you a bunch of money. When you begin to add up all the payments you no longer have to make, you can save quite a bit by just making small sacrifices and these are just a few examples of some expenses you can cut without too much trouble.
Debt Settlement or Debt Negotiation
Debt settlement can often be a good alternative to bankruptcy and prove beneficial for everyone involved. In most cases, your creditors would rather get some money from you than no money at all, which is what happen in a chapter 7 bankruptcies. A reputable debt settlement company can assist in letting your creditors know you are having financial difficulty and help negotiate lump sum settlements that will allow you to settle your debts for less than the full. Debt settlement is often a good way to get out of debt and to avoid bankruptcy, but keep in mind that it does have its drawbacks as well. With debt settlement, you may experience damage to credit continued interest accrual and possible collection activities until all debts are settled. However, this is the case if you were in a debt settlement program or not. Simply by not being able to make these payments, you run the risk of late fees, increased interest and collection activities.
Consumer Credit Counseling Services
If you are looking to avoid bankruptcy, in many cases, a credit counselor can help reduce interest rates and eliminate late fees; however, this is different than debt settlement in that you will still pay back the full balance owed plus a reduced interest rate. With debt settlement, you will typically repay a portion of the full balance owed. With that being said, a consumer credit counselor has experience working with creditors and often knows the right things to say to get your payments and interest rates reduced. However, similar to debt settlement CCCS will most likely damage credit while in the program. Although CCCS does not necessarily damage your credit score, most banks and lenders consider CCCS as a similar program to a Chapter 13 bankruptcy filing, so they may not extend you credit despite a positive credit score.
Sell Assets to Pay Debts
Prior to seeing the help of a professional, it is first wise to evaluate your situation and see what can be done with things you already have available to you. If you own any assets of value and are able to part with them, this may help you avoid bankruptcy. You can try selling some of these items for cash and then use the money to pay off your debts or even settle them if possible. To avid bankruptcy, it is especially important to take action when you realize that you can no longer afford to make the minimum required monthly payments on the asset, for example a home or car. It is always best to take action as soon as possible when you notice you’re unable to pay or begin to borrow from “Peter to pay Paul”. To avoid bankruptcy, it is important to realize you can’t borrow your way out of debt. In most cases, if you wait until you’re reasonably far behind on payments; it can be too late to take the necessary action to correct the debt problem. While it may be an inconvenience you for to take such measures, it is also necessary if and when possible. In the end, if you want to avoid bankruptcy, you have to decide if the temporary inconvenience is worth saving your credit and getting out of debt.
Put Together a Get-Out-of-Debt Plan
Once you have evaluated all the way you can cut expenses and found nothing else to trim, you make need to make a different approach to avoid bankruptcy. If you can’t cut any expenses, try increasing your income as an alternative approach? There are many ways to go about this. For example, your employer may be willing to consider increasing your hours? If this is not the case, perhaps you can get a second income from another job. While this may seem difficult, it can often be a big help. You won’t have to do it forever; just until the bills are under control. Coming up with some extra money might be the best way for you to avoid bankruptcy.
Additionally, the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 mandates that you take credit counseling classes prior to bankruptcy filings. Though you may be convinced that bankruptcy is the only answer, it’s in your best interest to open-mindedly consider credit counseling of debt settlement as an alternative.
Note: Please keep in mind that none of the information provided in this blog is to be considered legal advice. If you need legal advice, you should seek the assistance of a licensed attorney.
