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  Category: Articles » Finance » Bankruptcy » Article

Do Bankruptcy Alternatives Work?

By Susan Davis

Bankruptcy should always be a last resort to debt relief and many people could avoid this with a few bankruptcy alternatives. Before you make the tough decision to declare personal bankruptcy, you may first want to think about a few bankruptcy alternatives.

Avoiding bankruptcy will not only save your credit rating but it allows you to recover from a bad credit history much quicker. Here are a few bankruptcy alternatives that provide financial relief that can get you out of your financial bind.

Get On A Budget

The first thing you should do before making any major decision is take a hard look at your financial situation. Write out a budget and include details on monthly household income versus monthly household expenses.

Understanding how you are spending your money may help you get a handle on your finances and avoid bankruptcy. You'll be able to see areas where you can decrease your spending, such as eliminating the premium channels from your cable TV or taking your lunches to work from home.

Negotiating With Creditors

What ever you do, don't hide from your creditors because it becomes worse. Most often your creditors can help you if you call them and explain that you're having trouble with your finances. If you explain that you are thinking about bankruptcy, they may be willing to give you an alternative payment plan to help you avoid bankruptcy.

If you already have a credit card with a low interest rate, you might consider transferring the balance from a high rate credit card to the lower rate one. You may also be able to negotiate a lower interest rate with credit card companies. Call your credit card company and ask them.

Some will probably say no but others may say yes and this can be a huge monthly savings for you. It's worth a call because even if a few say yes, it's a big help to your monthly budget. Small gains like this can add up to more than what you think and may even balance your monthly expenses.

Get a Debt Consolidation Loan

Other good bankruptcy alternatives might involve getting a debt consolidation loan to pay off your high interest credit cards. A debt consolidation loan lowers your monthly payments and this could be a great way to avoid bankruptcy.

Borrow Money From Savings

Depending on your situation, it may be an option for you to borrow against your IRA or 401k to pay off credit cards or debts that have a higher interest rate. Before borrowing against or using your savings, you should consider any penalties carefully so you'll know if this is a smart option for you.

Credit Assistance

Credit assistance programs may also be bankruptcy alternatives that may work to help you. Credit assistance organizations manage your unsecured debt through a debt management program to help you avoid bankruptcy.

Working through debt management programs, creditors may offer benefits that can help you with your unsecured debts, by lowering your monthly payments, reducing interest rates and eliminating late fees. Depending on your past credit history, creditors may even re-age your account and show it in a current status.

Make sure you look into bankruptcy alternatives before you make the decision to change your financial life forever. Look at these bankruptcy alternatives to consider if they may be a better choice for you.
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