Bankruptcy Alternatives to Consider

Bankruptcy should always be the last resort, as it has a devastating impact on your credit score for 10 years. Of course, keeping a roof over your head and food on the table comes before preserving your credit score, which is why bankruptcy is a viable option for some. As you consider your options, think about less drastic measures that have less dire consequences than declaring bankruptcy.

Let Credit Cards Help, Not Hurt, the Situation

If you have been living off your credit cards, it can be tempting to continue as usual, doing nothing to stop the issue. However, eventually your credit card balance will become so high that you can no longer make even the minimum payment, which means that you can no longer rely on your cards to buy groceries or pay utility bills. Thus, continuing your current habits is not a good option for the long-term.

While constantly using your cards can allow debt to accumulate quickly due to interest, not all credit cards will ruin your financial situation. In fact, transferring some debt to a card that has low or zero interest may help. Access to this kind of card is rare, so take advantage of it by transferring as much debt as you can from higher interest cards. This should at least allow your payments to stay about the same for at least a few months, until you are back on your feet and able to pay off the cards.

If you still have good credit and some equity in your house, you can take out a home equity loan. Use this to pay off all your debt, and then begin making payments on the loan. Just make sure it features a lower interest rate than your credit cards in order for this bankruptcy alternative to be beneficial.

Take Advantage of Assistance Available to Consumers

Another way to lower your credit card payments is to seek out credit card consolidation. This option lets you roll all your payments into a single bill that you can pay monthly. While this is definitely easier than paying several card bills, it is also often cheaper since it can reduce your interest rates. The result is similar to when you transfer all your debt to a low interest card, but this option is available to just about everyone.

Yet another alternative to bankruptcy is consumer credit counseling. This involves paying a company to request that your creditors remove late fees and lower the interest rates so that you can pay less. You then pay one large sum to the company, which in turn distributes the money to your creditors

Finally, debt negotiation is an option that allows you to avoid bankruptcy. You can pay a company to negotiate lower payments with your creditors, or you can call the creditors on your own to make a deal. While the latter option is cheaper, it may be less effective depending on your persuasive skills. Also, most debt negotiation companies take their fees from the amount they save you, so you may not have to pay anything upfront.

Consider Legal Help

If none of these options work for you, it may be time to declare bankruptcy. You should at least attend an initial consultation with a lawyer to ensure you are eligible for this financial move.