Are you considering filing for bankruptcy? There are several things to keep in mind when making this decision. First, you want to be aware of the types of bankruptcy so you can know which one is right for you. Bankruptcy alternatives are also an option if you want to make sure you’ve looked into every choice before filing. Read on for more information on available alternatives to bankruptcy.
Reasons To File
Filing for bankruptcy is usually a last resort option when you are faced with overwhelming debt. There can be many reasons why this happens, but generally, too much debt and not enough resources to pay back creditors is why many people file for bankruptcy.
Why Does This Happen?
There are several reasons why bankruptcy can be the most attractive option. For many, bankruptcy is the answer after trying all other alternatives. Some of these reasons include the following:
- Loss of income due to unemployment or other circumstances
- Excessive medical bills
- Poor spending habits
- Uninformed about how credit works
Many of these circumstances are out of your control, but solutions exist.
How Debt Works
Debt refers to borrowing funds that you eventually pay back. This can come in the form of secured debts backed by the collateral or item they refer to, like a home or car. Unsecured debt, like credit cards, does not have this guarantee if you default on the loan.
Kinds Of Debt
There are several kinds of debt you can take on. Some basic options include a home mortgage, car loan, and credit cards.
Bankruptcy Alternatives: Your Options
When it comes to your options before resorting to bankruptcy, here is a list of alternatives to consider.
Doing Nothing
If you choose to do nothing with outstanding debt, your credit will take a significant hit. You also will continue to receive calls from creditors. This is not recommended.
Paying Off Slowly (snowball method, avalanche method, etc)
Another method that most people can start off with is gradually paying off outstanding debt. Try the “snowball” method, which focuses on paying off debts with the highest balance first. The “avalanche” method targets debts with the highest interest. Or do both at once!
Refinancing/Consolidating
Refinancing your car loan or even your mortgage can be helpful, especially if it means a lower payment. This makes it easier – and faster – to make dents in your debt balance.
Settling With Creditors
Sometimes creditors will work with you to create a payment plan to address your debt. They may also agree to have you only pay back a specified amount rather than the whole outstanding balance. Try giving your creditor a call to see what options are available.
Income Increase
A final example of bankruptcy alternatives is to find creative ways to increase your income and put the extra funds toward paying off your debt. For example, try selling some unused possessions on an online marketplace or garage sale for a simple way to earn extra cash. You can also pick up a second job if your schedule allows it.
Thinking of filing for bankruptcy and don’t know where to start? Contact Attorney David Brunelle today. Call (413) 539-5959 to get started.