Debt help
Many individuals look into bankruptcy when they come to the conclusion they are in over their heads, and they feel like there is no hope to get out of debt. Bankruptcy however, should be used as the last method to consolidate debt, and after all other debt management avenues have been looked into and will not work.
Before making the decision to file bankruptcy, consider each of the following alternatives:
• Refinancing
• Debt Consolidation
• Debt Settlement
• Debt Negotiation
If after you’ve considered each alternative to bankruptcy, you still find that your personal debts are greater than the income you have on hand to make payments each month, you may have no choice other than bankruptcy.
Refinancing
If you are a home owner and have not refinanced your home in the last year, it could be an option for you to obtain additional funds from the equity you have in your home, and use it to pay down your personal debt. This will consolidate the monthly payments on each of your accounts that you have used your refinance to pay off, and allow you to make a single, more affordable monthly payment. If you are able to use an equity loan from your home to get rid of your debt, make sure that you do not run right out and get more personal debt, because before you know it you will be right back where you were before the refinance!
Few people are able to consolidate all of their monthly credit card and loan payments by taking out a equity loan. Typically, a debt consolidation loan will require some form of collateral to secure it. Unfortunately, you do need to have fairly good credit in order to obtain a secured loan, but this is a viable option for someone who finds themselves in over their head before the payments start becoming late.
Debt Settlement
Sometimes you can settle your debt out of court. While it is possible to get a debt settlement on your own, it is advisable that you find a reputable company to help you negotiate with your creditors to reduce the amount of money that is outstanding. Typically, creditors are willing to accept less than the money that is owed to them if they are of the understanding you are going to be filing bankruptcy. They realize that a settlement is going to give them more money on the balance owed than the bankruptcy will, and it is in their favor to work with you in this situation. In order to settle your outstanding balances, you should have funds on hand to instantly pay your accounts and get them to close the account, and report it as “paid as agreed” to your credit report. If you’ve just received a fairly large tax return for example, you could consider attempting to settle your debt with each creditor by offering them less than the total amount owed to close out the account.
Debt Negotiation
Negotiating your debt can be helpful, although it doesn’t eliminate your credit card debt consolidation. Call each of your creditors and discuss with them that you are having financial difficulties. Explain you are considering bankruptcy, but before you take that leap you would like to see if you can negotiate your debt with each of your creditors to obtain payment arrangements that work better with your financial situation. Some credit card companies will lower the interest rate and stop late fees and finance charges from occurring, and it really helps you start paying down on the balances. The trouble with credit cards is that once you get behind, the interest and finance charges each month are as much as or more than your minimum monthly payments, so you are paying every month and never reducing your balance. With lower interest rates, and creditors who stop the finance charges and late fees temporarily, you can start chipping away at the actual balance, and hopefully pay off a few accounts during the negotiation period.