To some, filing for bankruptcy may seem like an easy way out of serious financial troubles, but the fact is that there are no quick fixes for serious debt. In fact, a bankruptcy can remain on your credit record for 10 years or more, so you may want to seriously consider bankruptcy alternatives before making the decision to file. To avoid bankruptcy, you need to seriously tackle debt and be ready to do the hard work to get your finances straight. There are a number of things that you can do to avoid bankruptcy.
Lifestyle Changes
If you credit is not completely destroyed, ask yourself if you can make lifestyle changes to reduce your expenses while you pay off your debt. Create a budget, and determine where you might be able to trim to find savings. When considering lifestyle changes to bring down debt (and avoid bankruptcy), here are a few areas that might help:
- Do you have a family member that can provide you with a short-term, interest-free loan?
- Do you really need some of your extras, like newspaper subscriptions, cable TV, gym memberships, etc.? Trim the fat and use the extra money to bring down debt.
- Pull equity out of your home by refinancing, or, given the tightening credit markets, consider selling your home all together. Use the proceeds to pay off your debts and rent a home instead.
- Cash out your retirements plans or sell family heirlooms, jewelry, or even that second car.
Negotiate with Creditors
Sometimes you can negotiate with your creditors to settle your debts and pay less than you owe. While this involves considerable haggling, letter writing, long phone conversations, and dealing with sometimes hostile customer service people, you can lower what you owe without further damaging credit or your financial future. You really have very little to lose, and it is certainly worth the effort.
Consumer Credit Counseling
If you credit is tanked and you aren’t making headway with lifestyle changes and creditor negotiation, you may want to locate Consumer Credit Counseling Services (CCCS). Check online for your local office. CCCS will help you develop a plan for paying off your debts without you filing for bankruptcy.
Getting Help
If none of these options work, or if CCCS won’t assist you, you may ultimately need to consider bankruptcy, but be sure to do your homework, as the type of bankruptcy you file (Chapter 13 versus Chapter 7) will affect your credit and your future finances in different ways. Seek the advice of a bankruptcy attorney or an accounting professional before taking this step!
