When crushing financial debt has burdened you down to the point that you see no way out, declaring bankruptcy can seem like your only option. Rushing into declaring bankruptcy however, without considering all your other options, may be a huge financial mistake. These five alternatives can help you avoid unnecessary bankruptcy.
Negotiation with Lenders
Most lenders are as anxious about getting their money paid as you are about not being able to pay it. Set up a meeting to negotiate a payment plan that works within your budget. You’d be surprised how eager they may be to help you. Lenders will often be willing to lower your minimum payments to get you through a hard time, or even cut some of the amount owing that’s been accrued through interest.
Debt consolidation is exactly what it sounds like; rather than paying off multiple loans with varying high-interest rates, you consolidate everything into one loan with a much lower interest rate. This can save you a significant amount of money when your monthly payments are due, adding up to hundreds, even thousands less.
What you’re doing is taking out a brand new mortgage on the balance you have left to pay, with different terms. By shopping around and comparing rates, you may be able to cut your interest rate by as much as half. When you already own your home and are in debt with a lender, this strategy can still work. You can get what’s called a re-mortgage, where you receive a loan based on the current value of your home to use to pay for your other debt. Many lenders will give you as much as 125 percent of your home’s value in one lump sum loan.
Selling Your Home
Thinking of selling your home can be painful, but it’s not as painful as living with bankruptcy. If your mortgage is paid off or partially paid off, seriously consider selling and moving into either a smaller house or a rented apartment. The cash you get for your home can help you quickly pay off your debt, letting you breathe a little easier.
Court Appointed Debt Management
Now, this next one sounds a little scary, although it really isn’t. If you find yourself in a situation where there’s no way to ever pay your creditors what they are demanding, a debt management specialist can come to your aid in court. The specialist will work very hard to negotiate an amount that you can afford to pay each month, at a term of up to five years. After the five-year term, anything else you owe is canceled out and the loan is considered repaid in full.
Don’t be in a hurry to declare bankruptcy, feeling like it’s your only way out. It’s not! These other options can save you from a devastating financial situation.
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