You might think that filing for bankruptcy is your only option, but there are actually a few alternatives. Let’s take a look at some of these.
Around 544,463 people filed for bankruptcy in 2020, which was far less than the number that filed in 2019. Every year, many people use bankruptcy to get out of debt, but bankruptcy is not your only option.
If you’re drowning in debt and can’t see a way out, you may wonder what the best alternatives are that are available to you. Here is a guide to help you learn more about other options you can use for debt relief if you need it.
Create a Debt Strategy Yourself
Some people avoid filing bankruptcy by creating debt strategies themselves. Creating your own debt strategy is one option to consider if you have enough income to cover your debts.
The best way to start a debt strategy is by creating a list of all your debts. When creating this list, include the creditor’s name and the amount you owe them. You might also want to write down the due date for the debt.
Next, create a budget by listing your income first. Then, list every fixed expense you have for the month, including your mortgage payment, utilities, insurance, and other normal monthly expenses.
After paying for these things, how much money do you have left each month? You can use this leftover income for normal monthly expenses, such as groceries and gas, but you’ll also have to use it to pay off your debts.
You can create a budget to determine how to divide your income among your debts. If you have smaller debts, you might want to make a plan to pay those first. After paying those, you can then move on to your larger debts.
Crafting your own debt strategy can be an effective alternative to bankruptcy in some cases.
Work Out Arrangements With Your Creditors
The second alternative to Chapter 7 bankruptcy is working out payment arrangements with your creditors yourself. If you choose to create a debt strategy on your own, this might be a good option to add to it.
Working out arrangements with your creditors will require calling them to discuss your situation.
When you call them, you can ask them to reduce your debt balances or interest rate. They might also agree to wipe out your late fees or interest charges.
If your creditors are willing to work with you by removing late fees and interest, you might be able to reduce your total debt load from the start. As a result, repaying your debts might not be as hard as you think.
Bankruptcy offers a way to obtain debt forgiveness, but you’ll also have to follow many bankruptcy laws. Secondly, you may experience some adverse consequences from filing.
Use Credit Counseling Services
While filing for bankruptcy is a great option for some people, others can’t file because they exceed the bankruptcy income limits. If you make too much money, you can’t use Chapter 7.
If you’re in this situation, you could consider credit counseling services. Credit counseling companies help you by creating a personal plan for you.
Through credit counseling services, you will have an expert helping you find the best way to repay your debts. A credit counseling company works this out in several ways:
- They contact your creditors
- They ask your creditors to reduce your balances, interest rates and required minimum monthly payments
- They create a unique plan for your situation to repay the debts
Most credit counseling plans require the consumer to pay a monthly payment directly to them. They then take this money and distribute it accordingly to your creditors.
After making payments for a set amount of time, you pay off your balances and are debt-free.
Take a Debt Consolidation Loan
To avoid bankruptcy and all the Chapter 7 laws, you could consider taking a debt consolidation loan. A debt consolidation loan gives you enough cash to repay every debt you owe.
If you want to use this option, you’ll need to find a lender that is willing to approve the loan for you. In other words, you might need a decent credit score to qualify.
If you qualify for the loan, the lender will issue you a check for the total amount. You can deposit the check in your bank account and pay every balance you owe.
Before using a loan to consolidate your debts, you’ll need to add up the amount you owe. You’ll need to get a loan that is equal to this amount, so you can repay every creditor the full amount you owe.
The benefit of using a debt consolidation loan is that you have only one payment to make each month.
The second benefit is that you will know when you will be debt-free based on the number of payments you must make.
Hire a Law Firm for Debt Settlement
One last bankruptcy alternative is debt settlement. Debt settlement is a process that often requires hiring an attorney.
The attorney’s job is to contact every creditor to work out a settlement plan. The settlement plan involves paying less for the debt than you owe.
For example, if you owe a creditor $5,000, they might agree to settle your debt for $3,000. If you can reduce every debt you owe, you might only have to repay 50 to 70 percent of your total balance.
Repaying your debts will be easier for you if you only have to repay a portion of the total balance instead of all of it.
Consider Bankruptcy
If you want to learn more about bankruptcy or other debt payment alternatives, contact the bankruptcy attorneys at Husker Law at 402-415-2525. We offer consultation appointments and provide advice and information to help you make the best decision for your situation.
