Saying Goodbye to Debt: Do You Know These 4 Alternatives to Bankruptcy?

If you’ve got major debt problems – you might think your only option is to file for bankruptcy. It can be a hard step to take, but for some, it’s the only option. However, that isn’t always the case. Did you know that there are a number of different options for you even if you think that filing for bankruptcy is inevitable? In this article, we’re going to look at them. Make sure you’ve exhausted every possible option before you decide that bankruptcy is for you.

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1. Get a debt consolidation loan

While it might not be the best idea to take out more debt in order to pay off other loans – this could be a viable option if you really believe that your money-issues are only short-term. A debt consolidation loan could help you by giving you one large loan to pay off all your smaller debts. This can work well if you can arrange a new loan with better interest rates and lower monthly repayment amounts which will help you clear other debts that are causing you more trouble to pay off. When you can shop around for different loans with more favourable payment plans and interest rates, this could be a good option.

This option will only really work for some people, and especially those who are only having short-term money issues.

2. Come to an agreement with your lenders

You might be able to come to an agreement regarding specific payment plans, extension periods, or a reduction in your total debt by discussing it with your lenders. Many of them will want to get some back rather than nothing if you file for bankruptcy. So give them a call and discuss your options, and make it clear that you are considering bankruptcy seriously. You can try sites like this for more information: www.debtconsolidationnearme.com/florida/index.php.

3. Get an administration order

An administration order ties up all your debts into one package to make the situation slightly easier to manage. Then you can make one single monthly payment to a court. These are normally for smaller debt amounts and are good for people who can afford to pay something back. After an initial period, the rest of the debt will be written off.

4. Get a debt relief order

The final of our alternatives to bankruptcy we will consider is the debt relief order. If you’ve got debt and don’t own a home, then you could be entitled to a debt relief order. These are normally granted to people who don’t have many assets and cannot repay their debts. When you get a debt relief order, lenders will not be able to take action to recover money owed for at least a year, unless they get specific court permission. This leaves you with a bit more room for movement without having to worry about having debt collectors taking any of your things away.

When you have one of these relief orders in place, you’ll still have to pay normal bills like your utilities. After this initial period, your debts will be written off. To qualify for one of these orders, you must not be able to pay any debts, but the debt needs to be a smaller amount. You also must not have many assets.

Bounce Back: How To Recover After A Financial Setback

Life is full of setbacks, and in these uncertain times having just one thing go wrong can set everything off the right track. Whether you’re just starting out after graduation, or you’re a fully established presence in the business world, a financial disaster can impact both your personal and professional life. When these setbacks occur, it’s important to stay calm and assess your options. Different situations have different solutions, so here are a few examples.

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Divorce

Even if a separation is amicable, making it official is costly, and emotionally draining. But once everything has been divided, and you are certain about what is yours, you need to reestablish credit in your own name. First, ward off any potential credit problems by getting rid of all joint accounts you had with your former spouse, and build up your new credit by making sure to pay all your bills on time. If you don’t have a lot of credit in your own name, try building it up by applying for a secured credit card, which requires you to pay cash upfront for a credit line.

Find out where you stand financially by getting reports from the three credit bureaus — Equifax, Experian and TransUnion — via the government-mandated site, AnnualCreditReport.com. If you spot any credit errors, write to your creditors or the credit bureaus and dispute any mistakes.

Debt

Having a lot of debt is probably nothing new to a Millennial, but that doesn’t make it any easier for anyone to live with it. Fortunately, if you’re patient and you stick to a thought-out plan, you could eventually free yourself from the grip of debt. Ask yourself the following questions to assess your situation:

  • What are your remaining assets?
  • How much money do you owe?
  • How much income do you bring in each month?
  • How much do you spend?
  • What is your credit score?
  • Are they any long term implications to the financial disaster (alimony, health issues, I.R.S. liens) that must be included in your recovery plan?

Once you’re familiar with your situation, you can begin to make a realistic repayment plan. If you need some help with this, get in touch with a money mentor who can point out other solutions. T may also be a good idea to set aside some emergency funds in case another setback occurs while you’re making progress with your repayments. Even if it takes you years, you can use these steps to free yourself from debt.

Medical Bills

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Medical problems can come in a variety of forms. If you work as a self-employed freelancer, or in hospitality, taking a few days off sick can set you back in shifts and leave you short of your rent for a month. More serious injuries and illnesses that lead to hospital stays will certainly lead to unexpected bills.

Recovering from these bills will put a strain on your finances for a while, but if you tighten your belt and employ the same steps you use to recover from debt, there’s a good chance your finances, and your health, will recover. Sometimes it helps to reach out to your bank and asking for a short reprieve. If you don’t ask, the answer will always be no.

If you have an ongoing illness or handicap, and feel you need more aid to recover financially, you could find a disability lawyer to help explain your options.

Unexpected Job Situation

Jobs aren’t as dependable as they once were. Sometimes you chose to leave your job, and you have emergency funds in place while you job hunt. Other times, you find yourself without a job, just when you’re starting to get your finances back into order.

If you’re in the latter situation, you really have no time to wallow in your disappointment. Clarify with your soon-to-be-former employer, how much longer you will be staying on, and if you will be paid for the time you are still an employee. Once you know how much longer you will have money coming in, spend your free time sorting out your resume and securing references. In this case, the best way to financially recover from losing your job is to make sure you get another one lined up as quickly as possible.

Bankruptcy

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Nothing feels quite as shameful and humiliating as having to declare bankruptcy. There is a horrible stigma attached to declaring bankruptcy, as though you were solely to blame for not paying your bills on time. But unfortunately, despite our best efforts, sometimes it’s impossible to pay off your debts. You’re not alone. A May 2011 survey from FindLaw.com indicated that one in eight adults in the U.S. — about 13 percent of the population — say they’ve contemplated bankruptcy.

However, instead of wallowing in feelings of failure and disappointment, you need to start looking into how you can turn your situation around. As difficult as it may be, you have to look at your situation objectively in order to identify what led you to this point. Only by understanding how you got here, can you begin to make an effective plan to recover from bankruptcy. Set a budget and stick to it, avoid payday loans, find a way to rebuild your credit, and be sure to monitor your credit reports regularly.

Foreclosure

Between 2007 and 2011, a record number of homeowners went through foreclosure, and there are currently 798,495 properties in the US that are in some state of foreclosure. If you’ve recently lost your home, you’ve probably gone through most of your savings. Once you’re set up someone, either with family or in rented accommodation, the best way to recover from foreclosure is to rebuild your savings by creating a ‘rainy day’ fund. Even if you’re happy to be renting for the rest of your life, having an emergency savings account can go a long way to helping you gain back some financial stability in case of other setback.