Bankruptcy Alternative for Bankruptcy Protection
Every bankruptcy alternative should be explored before filing personal or business bankruptcy. Filing any bankruptcy chapter will have long-lasting and detrimental effects on your credit. In most cases, bankruptcy will remain on your credit report for up to a decade. Ten years is a long time to be punished for financial mishaps.
To determine which type of bankruptcy alternative is best suited for your needs, you will need to conduct a bit of research. Several alternatives to bankruptcy exist including debt consolidation, debt settlement, credit counseling and budgeting.
Budgeting is by far the easiest and most cost-effective bankruptcy alternative. However, budgeting does require self-discipline. In order to be successful, you will need to create a list of income and expenses, make a plan to pay off credit cards and outstanding debt, allot for personal savings, and reduce spending. For step-by-step directions, read "Budgeting Before Bankruptcy."
Debt consolidation is a popular bankruptcy alternative. In most cases, you are required to own a home. However, a few companies offer debt consolidation loans to non-homeowners. Debt consolidation consists of taking out a loan and consolidating all credit card and unsecured debts into that loan.
Debt consolidation loans are usually home equity loans. Using the equity in your home, you secure the second mortgage with your property. Home equity loans are generally repaid over a period of 10 to 15 years. While debt consolidation can reduce your current debt-load, it can cost more to pay off debts in the long run. In some cases, you could be paying off unsecured debts for an additional 7 to 10 years.
Another thing to consider with home equity loans is this… Securing the loan with your real estate could put your home at risk for foreclosure. If you are unable to make payments on the home equity loan, the bank can call-in the note and demand payment in full. More details are provided in, "Debt Consolidation" is it the debt relief program to get out of debt? "
Debt settlement is a good bankruptcy alternative for people who have $10k or more in unsecured debts. Debt settlement involves negotiating with creditors to reduce outstanding balances. In some instances, debtors can negotiate deals with their creditors by simply making a phone call and an offer. In other cases, debtors will need the assistance of a professional debt settlement company or attorney.
Engaging in debt settlement on your own requires the ability to negotiate. You should also be prepared with an upfront cash payment and reasonable repayment plan. Otherwise, your creditors probably won't give you the time of day. Learn more about debt negotiations in "Debt Settlement" can provide debt relief and consolidation.
If all bankruptcy alternatives fail and you are forced into bankruptcy, remember it is not the end of the world. In some cases, bankruptcy can provide people with a new lease on life. Learn more about bankruptcy and bankruptcy alternatives in my blog article library. New articles are frequently added, so please stop back often
Published on September 15, 2008 at 02:05 AM