What are my alternatives to declaring bankruptcy if I am in debt?

According to the U.S. Federal Trade Commission (FTC), filing personal bankruptcy is usually a personal debt management option of last resort. Therefore, there are other debt management options you can employ to avoid bankruptcy. For instance, when you are in debt, you can contact your creditors and negotiate a debt settlement. A debt settlement is where the creditor allows a lower amount to be paid than the entire original balance. Usually, debt settlements are paid in 1 lump sum payment, or a series of payments.

Another option is to consolidate all debts into one loan. This means that a creditor, such as a company or bank, agrees to pay off all the original creditors and assume the debts. In exchange for the loan, you are responsible for paying the institution that lent the money. Sometimes, you can receive an introductory rate of zero interest, or you may have to pay interest on the amount of the loan. Generally, there are 2 types of consolidation loans. There is an unsecured consolidation loan, which is based on the person’s ability to pay. The second is a secured consolidation loan. This is a second mortgage, or a loan where some collateral is given to the company in exchange for the loan. The secured consolidation is risky, because if you miss payments, then you may have to give up your home or other collateral.

Therefore, to understand all the implications associated with alternatives to bankruptcy, you should talk with a lawyer.