Avoiding Bankruptcy: 3 Ways to Avoid Filing for Bankruptcy

If you are trying to avoid bankruptcy, there are a number of alternatives that you could look at. Although bankruptcy might seem like the easiest way out, it can do a significant amount of damage to your credit. Here are a few ways to avoid filing for bankruptcy.

1. Debt Settlement

One option that you need to consider instead of bankruptcy is debt settlement. Debt settlement is a process that will allow you to settle your debts for less than you owe. You could choose to complete this process with the help of a lawyer or on your own. If you handle the process on your own, you will need to negotiate with all of your creditors individually. If you hire a lawyer, they will handle the negotiation process for you. Regardless of who does the negotiating, typically you will need to come up with a one-time lump sum payment to each creditor to eliminate your debt with each. The creditors may be willing to take less than what you owe if you are close to filing bankruptcy. This will provide them with at least some repayment, whereas they might not receive anything if you had to file for bankruptcy.

2. Debt Consolidation

Another option is debt consolidation. With debt consolidation, you will essentially be taking out another loan to pay off your existing debt. This loan will need to be big enough to cover all of your existing debts. You will take the money from the loan and then use it to pay off each creditor. This process is beneficial because it eliminates the multiple payments that you were making on a monthly basis. Instead, you can focus on one singular debt payment each month. With this process, you can more easily focus on your debt and pay it down more quickly. You do not have to wonder which account you should be paying off first. Instead, you put every extra dollar that you get towards the debt payment, and before you know it, the debt is gone.

3. Credit Counseling

Credit counseling is another option that you should consider. Credit counseling will involve working with a credit counseling service to help eliminate your debt. There are many credit counseling services that you could potentially choose to work with in the market today.

A credit counseling service will sit down with you and look at all of your individual debt accounts. They will then help you come up with a debt management plan to take care of these debts. They will talk to all of your creditors for you and set up a repayment plan on your behalf. In most cases, the creditors will be willing to lower their interest rate in return for a regular monthly payment. You will then make one payment to the credit counseling service, and they will disburse all of your individual payments for you.

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