If you are struggling under a mountain of debt and don't see a way to climb out of it, bankruptcy may have crossed your mind. In fact, 3,589 Phoenicians and companies in April decided to file for bankruptcy. But the decision to declare bankruptcy is a big one, potentially affecting your personal life, your property and your credit score.
If you aren't ready to bite the bullet of bankruptcy yet, here are our top 3 alternatives to bankruptcy:
1. Debt Repayment Plan
When you declare bankruptcy, your creditors lose out on the debt you owed them because much of it is discharged through the bankruptcy process. Thus, creditors are usually open to negotiating a repayment plan, which may include lower interest rates or monthly payments.
2. Debt Management Plan
Some people would rather undergo a root canal than negotiate with creditors, however, especially if they have been harassed for their payments. A credit-counseling agency can act as a moderator between you and the creditor, negotiating on your behalf to create a debt management plan.
Typically, the agency will create a repayment plan based on your income and debts, and you make a monthly payment to the agency, which the agency will disburse to your creditors. Some agencies do charge a monthly fee for this service, and you should triple-check that it's a reputable company.
3. Debt Consolidation
If you're like many of us, seeing a stack of bills may make you want to run the other way instead of tackling various payments. Sometimes it's easier to pay off your debt if you just have to make one payment, which is where debt consolidation comes in. There are several debt consolidation options, ranging from combining separate debt into one debt consolidation loan, transferring debt to a low interest credit card, and consolidation with a home equity line if you have equity in your home.
There are advantages to this method, such as receiving lower interest rates and monthly payment amounts, but they can also come with risks too. Consolidating with a home equity line is typically an effective option in a strong real estate market, but if you default, the lender may have a right to repossess your property.
At the very least, if you are having trouble paying off your debt, you should contact your creditor ASAP and work out a plan you can afford. If these alternatives to bankruptcy aren't your financial solution and you do decide to eventually declare, a Phoenix bankruptcy attorney can help guide you through the process.
Related Resources:
- Find a Phoenix Bankruptcy Attorney (FindLaw)
- Finding a Bankruptcy Alternative (FindLaw)
- American Bankruptcy Institute: Consumer Bankruptcy Down Again (Phoenix Bankruptcy Law News)
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