At one time or another you may experience financial woes due to things that are out of your control. These include recessions, medical emergencies or even a changing business climate. You may find yourself unable to pay your creditors in such situations and bankruptcy may not be the best option.
Common Personal Bankruptcy Alternatives
Most of the time, your creditors will be willing to co-operate when you contact them to work out a workable payment plan. They may listen to you when you carefully explain why you cannot make your payments and suggest a payment arrangement.
Debt Consolidation Loan
Another option you may consider is a debt consolidation loan. A debt consolidation loan involves you working with a lender who will grant you a loan to pay off all your creditors.
After that, you will only be left with the debt consolidation loan payment. In the debt consolidation process, all your debts are gathered into one account with just one monthly payment. This helps reduce the number of payments you have to make.
There is also the possibility that the interest rate and total amount you pay every month may be reduced. Financial institutions like banks, finance companies and credit unions offer some form of consolidation loan. If you choose a personal bank loan, you will pay the same amount of money every month for 3 to 5 years.
Credit Counseling Plan
A credit counseling plan is a considerable alternative to filing a bankruptcy case. This plan allows you and your creditors to work together to lower interest rates and make your monthly payments affordable. To develop the plan, your credit counselor looks at your expense, monthly bills, income and debts.
The counselor then helps you create a budget that you can keep to make it easier for you to make those payments. You will be required to deposit money each month with the credit counseling service. The credit counseling service will then distributes payments to your creditors according to a payment schedule developed by the counselor.
This makes managing your money easier and credit counseling plans take around two or three years to complete. However, you may have to agree not to apply for or use any additional credit during this period. But finding a reliable credit counseling service is not easy, because most times those services are not reliable. Pay attention to the qualifications of a financial counselor and also check the debt counseling service’s rating with the Better Business Bureau.
You are required to go for credit counseling before you consider bankruptcy. This is because sometimes people accumulate credit card debt because they do not know how to handle their finances. A credit counselor can help them change their habits and avoid future debts.
Both debt consolidation and credit counseling are meant to save you valuable time and money. They also relieve financial stress while at the same time protecting your property. A resourceful attorney with experience in debt consolidation or credit counseling will help prevent companies from taking advantage of you with false promises. Your attorney will ensure that your legal rights are protected.
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