5 Alternatives to Bankruptcy When Debt is Out of Control

Getting into debt is surely easier than getting out of debt. Who is not capable of maxing out a credit card or charging purchases at every opportunity with some sort of credit account? But just because you are up to your ears in debt does not mean the only solution is in claiming bankruptcy. There are alternatives to bankruptcy which should always be viewed as a last resort. Bankruptcy can have long lasting effects on your credit rating which in turn will cause grief for future borrowing potential.

There are more than the five alternatives to bankruptcy mentioned here, but the following are the easiest to explore. If you have found yourself in the position of considering the bankruptcy option, take some time to research some alternatives. Bankruptcy may provide instant short term relief but it can have devastating long term effects. It should never be taken lightly.

Think first about why you would risk ruining your credit rating and future borrowing potential for the ease of making it through a few weeks or months of difficulty paying off some serious debt. Is it worth it if some of these alternatives can be considered and pursued?

1. Communicate with your creditors

2. Debt consolidation

3. Mortgage refinancing

4. Use a third party company to negotiate debt settlement on your behalf

5. Increase your income to decrease your debts

Approaching your creditors may seem pointless if they have been hounding you to pay up or else. But the truth is, all suppliers simply want their money and mostly are open to negotiation. Give them a call or write them a letter explaining your circumstances. Offer repayments of a certain amount per month.

While you need to keep it realistic and something that will fit in with your other commitments, the supplier needs some sort of affirmation that the debt will be paid at an agreed amount in the stated time frame.

If things are really serious and you have a number of different suppliers wanting your money yesterday, debt consolidation can be a solution. In basic terms debt consolidation consists of finding a lender who is prepared to take up all your existing debt and pay the individual suppliers.

Your obligation is to pay an agreed and manageable amount so that your overall interest is reduced; thereby reducing the overall interest you have been paying on a number of smaller debts.

There are several alternatives for refinancing or restructuring your mortgage. Many of us take out home loans without going into the finer details of getting a deal that suits us. Mortgages are mostly tailored to suit the banks or financial lenders. It is only once we start asking questions and asking for options that alternatives are provided.

If debt consolidation is not an option and you have tried to discuss repayment options then using a third party company to negotiate debt settlement on your behalf may see results. This will incur further costs but using an external source for your negotiations can sometimes have positive results where you have failed.

Keeping in mind the ultimate goal is to get your debts paid without claiming bankruptcy, the cost of hiring someone to do the talking for you may be worth your while.

There are two ways to improve your financial situation. Increase your income and decrease your spending. In times of crises the simple solutions are often overlooked. Perhaps you only need another one or two hundred dollars a week to see your way clear of your mounting debts. A part time job could make this a reality.

If personal debt is becoming what seems to be an insurmountable problem there are alternatives to bankruptcy. Consider all the options before taking what may seem like an instant relief but could turn out to be a nightmare in the long term. Being bankrupt at any time in your life will have lasting effects for many years to come. Think wisely about the future as well as the short term relief before you make that decision.

Copyright © 2011 Karen Wilton