Bankruptcy Alternatives

There are many alternatives to bankruptcy. Bankruptcy should only be used in extreme cases and as a last resort. Before considering bankruptcy, learn about the following options.

For more information see The Four Worst Things You Can Do For Your Credit.

1. Debt Settlement - Debt settlement, also referred to as debt negotiation, is when a third-party agency (like us) negotiates down the amount owed to a lower sum.
   Cost: Usually 15% of your debt.
   
   
2. Debt Consolidation - Debt consolidation is a loan. The loan proceeds are used to pay your creditors and you repay the loan to a debt consolidation agency. This option works best if you qualify for a loan high enough to cover your debts and those debts have high interest rates.
   Cost: The interest paid on the new consolidation loan.
   
   
3. Home Equity Loan - A home equity loan falls under the category of consolidation. You borrow money as a secured loan against your home, using the equity of your house. These loans are usually adjustable interest rates and you must qualify for the loan. Today, most lenders require a very high credit score and a strong equity position in your home.
   Cost: The interest rate plus lender fees.
   
   
4. Credit Card Balance Transfer - A credit card balance transfer is another option similar to consolidation. You transfer your balances from other credit cards to a single, usually new, credit card. Often you can get 0% interest as an introductory offer, but after a short period you will pay high credit card interest rates.
   Cost: Any interest you have to pay on the new credit card and annual fees, if applicable.
   
   
5. Debt Counseling - Debt counselors reorganize your payment plans and give you a longer amortization period allowing for smaller monthly payments. Once completed, lenders often consider these programs similar to bankruptcy and you may have a more difficult time re-establishing new credit.
   Cost: Usually a one-time enrollment fee into the counseling program plus a monthly fee .
   
   
6. Do-It-Yourself - If your debt is manageable, you may want to approach it the old fashioned way and pay off all the balances. In order to accomplish this, you must follow a strict payment schedule and if you pay the minimum payments you will make those payments for an extended time period.
   Cost: The interest you pay before deciding that you need help.