Submitted by Jen Jones on Sun, 01/10/2010 - 11:08am
Before filing for bankruptcy protection, it is well worth your time to seek out alternatives. Here are a few you for you to consider:
You know what budgeting is, but maybe you haven't given it serious thought. If you are finding yourself squeezed every month as you try to make payments to your creditors, it is possible that some creativity and sacrifice can give you enough breathing room to build and execute an escape plan. Check with your employer to see if the company offers an Employee Assistance Program with financial counseling services, as they can provide guidance about possible options. If some budgeting and perhaps very judicious borrowing could help you pay back your debts within 3 years while allowing you to live relatively comfortable, budgeting could be a good alternative for you.
What does judicious borrowing mean, exactly? Well, for one thing, it means no more loans from predatory outfits like payday loan stores, and it may also mean no more borrowing from credit cards and banks--these ostensibly legitimate outfits can be as exploitative as anyone. If you can borrow the money from a family member, or perhaps receive a low interest loan from a credit union or other borrower friendly institution, a loan can give budgeting the necessary punch to make it effective.
There are downsides, however; borrowing money to get your way out of debt is a little like a sale that promises you will save money by spending-- a contradiction in terms. The point of borrowing to get out of debt is to replace your existing debt with lower overall payments and/or monthly payments. If you aren't saving money, borrowing more is just asking for trouble!
You may not be in a position to do the kind of borrowing that can be labeled judicious; if you are considering bankruptcy, chances are good that your credit is hurting, and low credit makes for bad loans--or no loans at all. Borrowing from family has downsides, too: what if you become unable to repay the debt, for whatever reason? Financial problems can drive families apart, so it is important to tread carefully.
Another alternative is selling assets. If you have valuable assets, it is possible that filing for bankruptcy could cause you to lose those assets anyway ( but this does not, of course, include your personal home or car, which bankruptcy can help you save.) In that case, selling assets might be a good idea. On the other hand, this is just like the judicious borrowing example given above; how likely is it that you have valuable assets sitting around if you are in enough financial trouble to seek bankruptcy protection? Watch out for third party security interests in your assets; some assets may not be sale-able while someone else (say, a lender) has an interest in the asset, so be sure to check any agreements concerning that asset before you proceed.
Budgeting can also receive a boost from restructuring of your debt; if you are able to refinance your house, transfer credit card balances or seek out other methods, you may be able free up enough cash in your lowered payments to pay back the principals on your debts. This solution also comes with downsides and caveats, however: you may not be eligible to restructure any of your debts (especially now that banks are being so tightfisted over lending), and sometimes restructuring debt sounds a lot better than it turns out to be: transferring balances to take advantage of lower interest rates can end up backfiring if you are unable to pay before the grace period ends and if the regular interest rate is higher than the one you gave up. Refinancing can sometimes result in lower payments and less money paid overall, but those savings sometimes end up being passed to third parties in the form of fees or commissions.
As you can see, alternatives are out there, but the drawbacks, caveats and requirements mean that no one solution will act like a miracle cure. Give equal consideration to all your options--including filing for bankruptcy protection.
So...why settle for an alternative? Stuck with what seems like a mountain of bills you cannot pay or get a handle on? Maybe the best 'alternative' is to just look into filing bankruptcy. The truth is: It does so much more for so much less that everything else. The fact is that, had the bankruptcy laws not already been on the books, the creditor lobby would surely block their creation. Bankruptcy is just that good. You should check it out and you have nothing to lose. Many bankruptcy attorneys offer a totally FREE initial consultation, just for this purpose. In North Carolina, so does the Law Offices of John T. Orcutt. Just call toll free to +1-919-646-2654 or visit their website at www.billsbills.com . They have offices in Raleigh, Durham, Fayetteville and Wilson.
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