Considering Bankruptcy? You Have Options

Don’t Take the Plunge Just Yet

Although there is no real stigma to filing or declaring bankruptcy these days, many people would rather find another alternative. Also, bankruptcy may not be your best or only option if you are relatively financially stable or trying to save your home from foreclosure.

To find other options or alternatives, it is best to consult with a financial professional like a CPA or adviser, or a bankruptcy lawyer. There are programs available for distressed homeowners or low income wage earners, and an attorney can help you negotiate with creditors if you are unable to do so or feel uncomfortable about it.

• Debt consolidation: There are countless programs advertising debt consolidation services but you need to be aware that many of these are mere scams or which will take your money and do nothing for you. If you are considering this approach, you may want a legal or financial professional to help you. If you find a reputable program or a solution, you can make just one payment per month over time to eliminate all the debts. You may be able to get a low interest loan from a bank to accomplish this and only have to pay back the bank.

• Debt settlement: Contact the creditor and see if he or she will agree to change the terms of your debt to reduce payments, interest or principal. In many cases, the creditor will agree to reducing the principal by 50% or more over a set period. Check with your state offices for programs that are state sponsored or funded that are designed to counsel debtors like yourself.

• Programs for distressed homeowners: There are federal programs for homeowners that can reduce your interest payments or even your principal.

Budget your monthly expenses and cut out frivolous expenditures. If you can get a second job or a part-time one along with your regular one, a few hundred dollars per month could make a huge difference. In conjunction with this, try to consolidate your debts or make every effort to reduce your balances so that relief is in sight. Pay off the small ones first so you can see some progress and give you motivation.

If you do not foresee any significant progress in reducing your debt within 3-5 years, then consider bankruptcy. A Chapter 13 involves paying off your creditors within 3-5 years while saving your home or any other property that might not be exempt under a Chapter 7.

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