Several options exist outside of bankruptcy. Which option is best depends on the individual’s financial situation. Given the available alternatives to bankruptcy for those in financial trouble, it is often best to consult an attorney. Before deciding to handle your own bankruptcy, understand that bankruptcy is a complex area of law and mistakes can be disastrous and permanent.
DEBT CONSOLIDATION
Debt consolidation is the process of resolving financial trouble by consolidating debts into monthly payments. Existing creditors may be willing to lower interest rates or create other favorable terms with debtors to avoid the effects of bankruptcy. However, debt consolidation is sometimes a difficult option because it is usually only available to debtors with a realistic chance of repaying all their debts within a reasonable time.
A debtor may attempt to acquire a debt consolidation loan through which the debtor borrows against equity to repay existing debt. Debt consolidation loans create the risk of creating more debt, making a bad situation worse.
SETTLEMENT WITHOUT BANKRUPTCY
Instead of filing for bankruptcy, a debtor may negotiate a settlement with creditors to reduce debts or improve existing terms. Creditors are often willing to compromise to prevent the debtor from discharging debt obligations through bankruptcy.
