There is a stigma towards bankruptcy that can really put people off the idea, or worse, it can cause them to delay the decision until it causes even more damage. Sometimes, filing for bankruptcy really is the best option and once the decision is made, you can start to plan to rebuild and start again.
It is, of course, advised that you consider all of the alternatives to filing for bankruptcy before you move ahead. There may be a solution that you are not aware of that can get you out of the situation that you find yourself in.
Having more debt than you are able to manage can be one of the most stressful situations that you find yourself in. Take a look below to find out five effective alternatives to bankruptcy and how they can potentially work for your situation:
1. Aggressive personal budgeting
By making some drastic changes to your spending habits, you will be able to set aside more money each month and you might be able to dig yourself out of debt faster than you think. If you take a long hard look at your outgoings you might find that there are some opportunities to cut down on your spending and get back on track.
If you are looking for the best alternatives to bankruptcy, then you should get in touch with a credit counselling service. They will be able to provide you with all of the tools you need and help you to plan your personal budget.
Once you have more funds available to you, you can think about being much more aggressive when it comes to paying off your debts in a timely manner.
2. Refinancing
If you have a lot of different debts outstanding it can seem very overwhelming. This can lead to very high rates of stress as well as very high-interest rates. By refinancing or consolidating your debts you will be able to get a much lower interest rate and pay off the debt a lot faster.
A debt consolidation loan allows you to combine several outstanding credit cards and bank loans into one single loan. If you qualify for a debt consolidation loan, you use this money to repay your other debts. At this stage you will be paying into just one loan. Not only will the payment be less each month it will be much easier to manage. This will not erase any debt, but it will allow you to reduce your monthly minimum payments.
Always be vigilant when refinancing. You need to be sure that the deal is not too good to be true, or one that will lock you into payments for a long time to come. When evaluating your refinancing options you should look at what will happen in the long term, especially when it comes to interest rates. You want to be sure that you are not just delaying the bankruptcy, but avoiding it completely.
3. Debt settlement
This is one of the best alternatives to bankruptcy that you should definitely look into. This is sometimes called an informal debt settlement. When you have been stuck with a large amount of debt for a while and the debt is old, there is a chance you will be able to settle the debt with the creditor.
By settle, we mean that can offer to pay a lower amount of the total owed debt provided you pay it all in one go. This can be as much as 50% of the full debt amount. Being aware of these options can be very useful if you are selling off large assets elsewhere during this process.
4. Consumer proposal
By engaging a licensed insolvency trustee you will be able to have them negotiate on your behalf with the owners of your debt. They are experts at what they do and will likely be able to negotiate the best possible deal to settle your debts
This can often be the best way to reduce your debt and allow you some relief to pay back a little less each month. This can free up the money you need right now so that you can get back on track in the long and short term.
5. Don’t file for bankruptcy
This might seem counterintuitive, but one of the best alternatives to bankruptcy is to not file for it at all. Ask yourself whether you need to file for bankruptcy, or whether you can manage in the long-term by juggling your finances. In five or so years, you will be able to recover from a bankruptcy, whereas any debt refinancing or the other alternative will take years to pay off in full.
Instead of avoiding bankruptcy just because of all of the negative connotations, it really is worth exploring it as an option in line with every other method you have at your disposal. It could really be the best thing for your current and future financial situation.
