Alternatives to Bankruptcy

 

If everything seems out of shape and filing a bankruptcy case gives the impression of a total solution, think again. Bankruptcy may be an easier way out of debt but the effect it will make on your credit report could be haunting you for as long as ten years. So before you resort to bankruptcy, try to consider all the alternatives available. You'll never know what's good for you if you don't try.

 

Here are some ways to avoid bankruptcy:

 

1. Negotiate.

 

There's no better alternative to bankruptcy than talking to your creditors about the matter. You can tell them about your situation like why you're having a hard time paying those debts. You can even ask them if they can give you more leeway such as extended payment period, lower monthly fees, or reduced interest charges. Things may not work the way you would want it to be, but still it's worth a try.

 

Here’s a sample letter that you can use (better than phoning):

 

“Dear Sir or Madam,

 

I regret to inform you that I can no longer afford to make my minimum payments of $xxx per month on my credit card account with you (account number 111-222-333). I would like to request the closure of my account, followed by the settlement of the debt on a monthly payment plan. Please advise what kind of terms I could expect from such a plan.

 

Yours faithfully…”

 

Once you begin communication with this letter, there’s a very good chance that you’ll be contacted, and there’s a very good chance that the company will settle with you for less than the total amount due.  Yes, this will be noted on your credit report, but should be less damaging than a bankruptcy entry.

 

 

2. Borrow from a family member or from your friends.

 

It may be another financial burden but at least you'd be able to get the collection efforts off your back. You could ask your family or your friends for a reasonable mode of payment. Just be sure to pay them as soon as you can.

 

3. Go for debt consolidation plan.

 

If you haven’t considered debt consolidation, you should consider that first.  Yes, you’ll be paying back the money you owe, but that’s better than the ten or more long years that you’ll be suffering if you start the bankruptcy proceedings.

 

Merging your different loans into one could be a good move. You can go to a bank or any financial institution that will most likely lend you enough money to pay your