Most Americans carry some type of debt, whether it’s school loans, credit cards, a mortgage, or other loans. Sometimes, these debts take over, and it becomes impossible to figure out a way to pay everything owed every month.

In dire circumstances, the only option might be filing for bankruptcy, where the court takes over and either sells all of your assets or creates a payment plan for reducing and eliminating your debts.

Is bankruptcy the only answer? Since bankruptcy can cause you financial distress for many years since it destroys your credit rating, it’s a worthwhile investment of time to determine whether there are any other options to bankruptcy.

Here are some to consider.

Contact Your Creditors About Payment Plans

Some lenders have no sympathy and won’t negotiate any sort of payment plan. They won’t reduce your balance, and they’ll put a black mark on your credit report as soon as you miss a payment. Fortunately, not all lenders are the same when it comes to payment difficulties.

From credit card companies to car loan lenders to student loan vendors, many debtors will work with you to make repayment possible. You may actually be able to arrange to pay less money over time, halt your payments for a few months, or negotiate a lower payout if you agree to pay the entire amount owed in one payment.

In some cases, you can actually share your worries about bankruptcy to your lenders, and they may agree to help you avoid filing if it means they’ll receive some payment from you rather than having most of, or the entire debt eliminated through bankruptcy.

An article on bankruptcy alternatives from The Balance reveals:

“Your creditors would rather get some money from you than no money at all. Let your creditors know you are having financial difficulty and want to avoid bankruptcy. Express your willingness to pay the debt and ask if they can help ease the burden by lowering your monthly payment or decreasing your interest rate (or both). Many credit card companies and banks have hardship programs intended for this type of situation.”

Even if you’re not able to make arrangements with every creditor, you might be able to lessen your financial burden enough that you are able to recover from your financial trouble without the aid of bankruptcy.

Try to Settle with Creditors and Collectors Without the Court

One of the ways the court helps a debtor during bankruptcy is through payment plans (Chapter 13 bankruptcy) and asset liquidations (Chapter 7 bankruptcy). Your creditors will negotiate settlements during bankruptcy in the same way that they might if they were dealing with you directly.

Debt settlements are a popular way that consumer credit counseling companies help their clients reduce their debts. However, you might be able to secure these settlements on your own without the help of a credit counseling company or bankruptcy. All it takes is a phone call to your creditor to start the negotiations process.

Try to Downsize or Liquidate on Your Own

If you’re facing foreclosure on your house, bankruptcy might actually be the best option you have for saving your home and keeping your family in place. However, if you’re facing bankruptcy and you don’t own a house, you might benefit from making the hard decision to downsize and sell your possessions on your own.

When combined with debt consolidation efforts, debt settlements, and payment arrangements, the sale of your possessions might actually make it possible to avoid bankruptcy. However, it’s important that you truly decide whether bankruptcy is the best step – or not – for your personal circumstances.

One of the facets of your life that the court will examine when deciding whether to grant your bankruptcy request is whether you’ve made any significant financial decisions immediately before filing. It’s important that your efforts to avoid bankruptcy aren’t interpreted by the court as an attempt to subvert the bankruptcy process.

You may wish to speak with a lawyer about whether bankruptcy would offer the best solution or whether another route might help you more, particularly before you begin making any major financial decisions.

Do You Need Help Filing for Bankruptcy?

Have you recently decided that you might need to file for bankruptcy? Would you like to know more about the bankruptcy process? Contact Suburban Legal Group for assistance with all matters relating to bankruptcy.

DISCLAIMER: All information on this website is provided for informational purposes only and is not intended to be construed as legal advice. Suburban Legal Group PC shall not be liable for any errors or inaccuracies contained herein, or any actions taken in reliance thereon.