Debt is a way of life for many consumers. It can be so overwhelming that bankruptcy seems to be the only answer. Because bankruptcy can have such a devastating effect on your credit score, it’s better to seek other alternatives before filing Chapter 7 or Chapter 13 bankruptcy. If another solution saves your credit, it’s better to take it, even if it will take longer or cost more to get rid of your debt.
Sell Assets To Pay Debts
If you own any assets, you can try selling them and using the money to pay off your debts. This is especially true when you can no longer afford payments on the asset, for example a car or home. Take action immediately when you notice you're unable to make payments. If you wait until you're behind on payments, it may be too late.Selling your assets may inconvenience you for awhile. You have to decide if the temporary inconvenience is worth saving your credit.
Pay Your Way Out of Debt
Can you afford to pay off your debts over a period of time? Right now, it may seem like you can't afford your debt, but if you take a closer look at your budget, you may find extra money. You may be able to cut out those nice-to-haves that you don't really need. Do you have cable television? Premium channels? A cell phone and landline phone? These are examples of some expenses you can cut without too much pain.
If you can't cut any expenses, how about increasing your income? Maybe your employer will consider increasing your hours? Perhaps you can get a second income? Do you have a hobby or skill you can use to make more money? Coming up with some extra money might be the solution you need to avoid bankruptcy.
Negotiate With Your Creditors
Your creditors would rather get some money from you than no money at all. Let your creditors know you are having financial difficulty. Express your willingness to pay the debt and ask if they can help ease the burden by lowering your monthly payment or decreasing your interest rate (or both). Many credit card companies and banks have hardship programs intended for this type of situation. You'll never know if you don't ask.Consumer Credit Counseling
If you don't have luck working with your creditors on your own, enlist the help of a professional. A consumer credit counselor has experience working with creditors and often knows the right things to say to get your payment and interest rate reduced.
The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 requires credit counseling prior to bankruptcy filings. Though you may be convinced that bankruptcy is the only answer, it's in your best interest to open-mindedly consider credit counseling. The debt management plan payments may seem out of reach, but if you look, you may find holes budget.
