No one wants to file for bankruptcy. It’s something of a permanent black mark on your financial record, but when debt becomes overwhelming, it can seem inevitable. Is there a better way, or an alternative? It depends on a situation, but in many cases, there are options besides filing for bankruptcy. In order to determine the best approach, you’ll need to consider a number of factors.
Assess Your Debt
The first step in determining how you should manage your particular financial situation is to evaluate the sources of your debt. For example, it might be time to file for bankruptcy if you’re being sued for unpaid debts or you’ve found yourself paying your bills out of your retirement account. On the other hand, if your primary source of debt is uncovered medical bills, it may be worth trying to negotiate with the hospital or provider or looking into their financial aid programs. Your decision will depend on the exigency of your circumstances, as well as the source of your debt.
Consider Credit Counseling
Credit counseling programs come in all shapes and sizes, and some programs, like non-profit organizations, can do a world of good for their clients by helping them reduce their monthly payments and steadily pay down their debt in a more manageable way. Other programs, however, can end up compounding your problems, which is why it’s important to do your research before signing up. “Lately, there’s been a spike in the number of Better Business Bureau reports regarding credit counseling agencies,” explains bankruptcy lawyer Rowdy Williams. That’s a sign that working with these programs could be risky, but a lawyer can help you evaluate your debt and decide if a credit counseling program would be helpful to you.
Debt Settlement Options
If your debt largely comes from one or two major sources, one way to address the problem is by pursuing a debt settlement program. What does that mean? Debt settlement is a fairly personal pathway that involves negotiating with a creditor to pay a lesser amount than what is owed. These negotiations may also pass through a lawyer or other intermediate organization. This may damage your credit score, but not as much as filing for bankruptcy, and it can leave you much less stressed about your financial situation in the long run.
Borrow And Budget
If you don’t make a lot of money, even a small amount of debt can feel disastrous, but at a big picture level, it may not really be that serious. That’s why you might want to consider trying to borrow money from friends and family and do some serious budgeting to try to catch up on your bills. Friends and family tend to be more forgiving about the repayment process – for example, they’re less likely to charge interest, which can make it easier for you to pay them back.
When trying to avoid bankruptcy, it’s sometimes necessary to combine a variety of strategies. You might need to budget and borrow, consult a lawyer, and talk to your creditors to determine the best approach to your finances. Just remember that debt doesn’t determine whether you’re a good person or trying your best. Debt may be stressful, but ultimately, it’s a common problem with a range of possible solutions.
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