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By Debbie Dragon
Many people want to file bankruptcy the moment they realize
they are in over their heads, and they feel like there is
nothing they can do to get out of debt. Bankruptcy however,
should be used as an absolute last resort- after all other
options have been thoroughly researched and exhausted.
Before making the decision to file bankruptcy, consider each
of
the following alternatives:
• Refinancing
• Debt Consolidation
• Debt Settlement
• Debt Negotiation
If after you’ve considered each bankruptcy alternative, you
still find that your personal debts are greater than the money
you have available to make payments each month, you may have
no
choice other than bankruptcy.
Refinancing
If you are a home owner and have not refinanced your home in
the last year, it may be possible for you to obtain additional
money from the equity you have in your home, and use it to pay
off your other debt. This will eliminate the monthly payments
on each of your credit cards or loans that you have used your
refinance to pay off, and allow you to make a single, more
affordable monthly payment. If you are able to use refinancing
of your home to manage your debt, make sure that you do not
run
right out and get another credit card or car loan, because
before you know it you will be right back where you were
before
the refinance!
Debt Consolidation
Many individuals are able to consolidate all of their monthly
credit card and loan payments together by taking out a debt
consolidation loan. Typically, a consolidation loan will
require some form of collateral to secure it. Unfortunately,
you do need to have fairly good credit in order to obtain a
debt consolidation loan, but this is a viable option for
someone who finds themselves in over their head before the
payments start becoming late.
Debt Settlement
Sometimes you can settle your debt out of court. While it is
possible to get a debt settlement on your own, it is advisable
that you find a reputable company to help you negotiate with
your creditors to reduce the amount of money that is owed.
Typically, creditors are willing to accept less than the money
that is owed to them if they believe you are going to be
filing
bankruptcy. They realize that a settlement is going to give
them
more money on the balance owed than the bankruptcy will, and
it
is in their favor to work with you in this situation. In order
to settle your debts, you should have money on hand to
immediately pay your creditors and get them to close the
account, and report it as “paid as agreed” to your credit
report. If you’ve just received a fairly large tax return for
example, you could consider attempting to settle your debt
with
each creditor by offering them less than the total amount owed
to close out the account.
Debt Negotiation
Negotiating your debt can be helpful, although it doesn’t
eliminate your debt. Call each of your creditors and discuss
with them that you are having financial difficulties. Explain
you are considering bankruptcy, but before you take that leap
you would like to see if you can negotiate your debt with each
of your creditors to obtain payment arrangements that work
better with your financial situation. Some credit card
companies will lower the interest rate and stop late fees and
finance charges from occurring, and it really helps you start
paying down on the balances. The trouble with credit cards is
that once you get behind, the interest and finance charges
each
month are as much as or more than your minimum monthly
payments,
so you are paying every month and never reducing your balance.
With lower interest rates, and creditors who stop the finance
charges and late fees temporarily, you can start chipping away
at the actual balance, and hopefully pay off a few accounts
during the negotiation period.
About The Author: This article has been provided courtesy of
Destroy Debt, www.destroydebt.com
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