Bankruptcy Alternatives
Part of the process for deciding whether or not to file for bankruptcy includes looking at your alternatives. Depending on the state of your finances you may be able to avoid bankruptcy by pursuing one of the following alternatives.
Home Equity Loan
Homeowners who have adequate equity in their home may choose to apply for a home-equity loan to consolidate all of their debt into one monthly payment. Home equity loans typically have lower interest rates than unsecured debt and a repayment period that can vary from 10 to 30 years. This means that your home equity loan payment is lower than the sum of all of your previous debt payments combined.
Check out our list of lenders that offer great rates on home loans for people with less than perfect credit
Debt Consolidation
Consumers may choose to use one of the many credit counseling services out there. These agencies typically have agreements in place with most of the nation’s major creditors allowing you to pay a reduced interest-rate and reduced monthly payments for a fixed period of time. You will make one payment per month to the credit counseling/consolidation company and the company is responsible for disbursing your payments to your creditors. If you choose this option make sure you research the companies thoroughly as some have a better track record than others.
Debt Negotiation
Sometimes referred to as debt settlement, debt negotiation is often-times used for individuals who cannot maintain a debt consolidation/credit counseling program. Typically a debt negotiation involves paying a certain percentage of your overall debt and the company will then consider the debt as having been paid in full. This may impact your credit score nearly as much as filing for bankruptcy so take the time to research this option before you pursue it.
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Transfer Debt to a Low-Interest Rate Credit Card
Depending on your current credit worthiness this may be an option for you. If your credit rating and income are sufficient securing a high credit line on a low fixed interest rate credit card would allow you to transfer most or all of your debt. This way you would save money on interest and managing your finances would be easier – one card and one payment.
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