{"id":356560,"date":"2019-05-15T07:00:51","date_gmt":"2019-05-15T13:00:51","guid":{"rendered":"https:\/\/www.creditrepair.com\/blog\/?p=356560"},"modified":"2022-03-29T19:20:25","modified_gmt":"2022-03-30T01:20:25","slug":"alternatives-to-bankruptcy","status":"publish","type":"post","link":"https:\/\/www.creditrepair.com\/blog\/finance\/alternatives-to-bankruptcy\/","title":{"rendered":"Alternatives to Bankruptcy"},"content":{"rendered":"\n
\"bankruptcy\"<\/figure>\n\n\n\n

Bankruptcy is often seen\nas a fresh start, allowing consumers to wipe out debt and have a clean slate.\nWhile U.S. bankruptcy laws are designed to provide debt relief for those who\nare struggling with bills they can’t pay, not every person and not every type\nof debt qualifies. For example, your income and assets may disqualify you from\nbankruptcy. You’ll remain responsible for certain types of debt, including federal\nstudent loans, alimony, and child support, even after a successful bankruptcy\nfiling. <\/p>\n\n\n\n

What’s more, bankruptcy\ncarries dire consequences that will follow you for years. A bankruptcy can\nremain on your credit report for up to 10 years. This black mark can make it\ndifficult to qualify for mortgages, car loans, and other types of financing.\nDepending on your location and industry, it can even affect your chances for\nemployment.<\/p>\n\n\n\n

Fortunately, you may be\nable to get out from under staggering debt with one of these alternatives to\nbankruptcy. Although many people who are in debt ignore the problem in the hopes\nit will resolve itself, facing the issue head-on is the first step to a\nbrighter financial future. <\/p>\n\n\n\n

Reducing Expenses<\/strong><\/h2>\n\n\n\n
\"reduce<\/figure>\n\n\n\n

Trimming unnecessary\nexpenditures frees up funds to pay off debt. Try cutting cable, switching to a\nless expensive cell phone plan, and eliminating app and website subscriptions. <\/p>\n\n\n\n

If you don’t already track\nyour spending, start doing so to find the holes in your budget. You may be\nsurprised how much you spend on take-out food, coffee, entertainment, and other\nitems. Start bringing lunch to work or check out movies from the library\ninstead of purchasing rentals. These small changes can really add up over time.<\/p>\n\n\n\n

Credit Counseling and Debt Education<\/strong><\/h2>\n\n\n\n

Certified credit\ncounselors can help you make a plan to manage debt through educational\nmaterials and workshops, money management information, and budgeting\nassistance. They may also negotiate with creditors on your behalf to reduce or\nremove late fees, interest rates and penalties, or to settle your debt for a\nportion of what you owe. <\/p>\n\n\n\n

Some agencies charge\nexorbitant fees and do little to help their clients get out of debt. To help\nconsumers avoid unscrupulous firms, the U.S. Department of\nJustice<\/a> maintains\na list of approved credit counseling agencies. You can search this database by\nlocation to find a reputable firm in your area.<\/p>\n\n\n\n

Negotiating with Creditors<\/strong><\/h2>\n\n\n\n

Although a credit\ncounseling agency can negotiate with creditors on your behalf, you can also\ntake this step independently. First, list all your income sources and monthly\nexpenses to determine how much you can pay toward your debt. Then, call each\ncreditor and explain your situation, particularly if you are unable to make\npayments because of job loss, medical issues or other extenuating\ncircumstances. <\/p>\n\n\n\n

Have a specific request in\nmind before making each phone call. For example, you may want to request a\nwaiver of late fees, several months of skipped payments, temporary or permanent\npayment reduction, or loan modification to lengthen the term or lower the\ninterest rate. Keep in mind, however, that creditors are under no obligation to\noffer these benefits.<\/p>\n\n\n\n

Debt Settlement<\/strong><\/h2>\n\n\n\n

If you’ve fallen far\nbehind on your debt payments, creditors may agree to accept a settlement for a\npercentage of the total amount due. Doing so can save a credit card company\nmoney compared to hiring a collections agency, suing you for the balance and\npursuing a judgment.<\/p>\n\n\n\n

For example, if you have\n$20,000 in credit card debt, the creditor may accept $10,000 and agree to write\noff the rest of the debt. This saves you from mounting interest, late fees, and\npenalties that would ensue if you continued to miss monthly payments.<\/p>\n\n\n\n

Debt settlement is usually\nan option only if you have home equity, assets, or savings you can use to make\nan offer. In addition, your credit report will show that you settled the\naccount for less than agreed, which can negatively impact your credit score.\nThe IRS considers the forgiven balance income, which means you will have to pay\nincome taxes on the full amount. In the example above, your taxable income for\nthe year would increase by $10,000.<\/p>\n\n\n\n

Debt Consolidation<\/strong><\/h2>\n\n\n\n
\"bankruptcy<\/figure>\n\n\n\n

If you have several\nhigh-interest credit cards and loans, you may be able to save money each month\nby combining them into one loan with a lower monthly payment. This strategy,\nknown as debt consolidation, can take on <\/ins>several\nforms depending on your situation. Some of the most common types of debt consolidation\ninclude the following:<\/p>\n\n\n\n