Is your financial situation in trouble? Whether you’ve recently been laid off or you’ve racked up thousands of dollars in credit card debt, filing for bankruptcy can eliminate or reduce debts and help you pay them back over time.
There are a few long-term effects of filing bankruptcy, so you may not be ready to file just yet. If your need isn’t immediate, you may want to explore options other than filing for bankruptcy.
Alternatives to Filing Bankruptcy
Depending on your situation, you may find yourself on the fence: should you file or should you try something else? Here are some alternatives to filing bankruptcy that could help you manage your debt.
Negotiate With Your Creditors
Is it time to settle your debts? If you have an income or property you could sell, you may be able to negotiate debt consolidation or a reduced debt settlement with your creditors. Some people are able to settle debts for less than they owe if creditors are looking for repayment as soon as possible.
What are your options?
- Debt Consolidation. Having a hard time keeping track of your debt? Put your debts into a single loan so it’s easier for you to make monthly payments.
- Debt Settlement. Strike a deal with your creditors and create a reduced payment schedule. The snowball approach lets you pay off small debts first and work your way up to paying larger debts. The debt avalanche method lets you pay back debts with the highest interest rates first.
Seek Credit Counseling
Negotiating with creditors can be stressful. There’s nothing wrong with asking for help from an expert. Credit counseling can help you gain the understanding and confidence you need to manage your debts, as well as offer advice for handling your finances in the future.
A credit counselor can help you create a debt management plan with your creditors. Only certain debts, like credit card debt or personal loans, can be included in a debt management plan. Mortgages, car loans and student loans cannot be included.
Restructure Your Mortgage
Restructuring your mortgage could help you avoid foreclosing on your home. If you’re having trouble paying your mortgage, you should discuss a new payment plan with your creditor.
You could also refinance your mortgage altogether to apply for lower interest rates on your loan. Lower interest rates help you put more equity into your home and can reduce your monthly payments, which may help you save money to pay off other debts.
Cut Back On Spending
Your spending habits may be part of the problem. If you need money to continue paying off debts, you should revisit your budget, analyze what you are spending money on, and take notice if you are adding to your debt.
Your monthly debt should not exceed 20% of your take home pay. This is a good goal to keep in mind as you examine your finances.
You may need to press pause on activities like eating out, going to the movies or ordering your favorite coffee every day. These activities add up and you could be spending more than you realize.
What subscription services are you paying for? Cancelling these monthly charges can give you money to put toward your debts.
- Cable services
- Streaming services
- Gym memberships
- Magazine subscriptions
Sometimes cutting back isn’t enough. You may need to sell off property in order to pay off your debts, create a debt repayment plan or file for bankruptcy.
Filing for Bankruptcy
Filing for bankruptcy may be the best way to move forward. You may have already explored alternatives to filing bankruptcy, or you may need to address overwhelming debts immediately.
Is your debt piling up? Chapter 7 bankruptcy wipes away unsecured debts, like credit card debt or medical bills. Are you behind on home or auto payments? Chapter 13 bankruptcy helps you get back on track. You’ll be responsible for committing to a repayment plan based on a reduced payment to your creditors.
Ready to explore your bankruptcy options? You should seek the advice of an attorney who will help determine which chapter to file for your unique situation and guide you through the bankruptcy process.
Contact Reynolds & Gold. We can help you get a fresh start.