3 Debt Settlement Options to Consider before Filing for Bankruptcy

Before you go through with a bankruptcy, there are other debt settlement options that you need to consider. Settling for bankruptcy should be your last possible option. When you are faced with bankruptcy, it can be a very stressful time. Therefore, you may not be thinking clearly. You might let someone tell you that bankruptcy is the best option and you simply go through with it. However, bankruptcy is not always the best option that you have. Here are a few other options that you should consider to take care of your debts instead of going with bankruptcy. 

1. Credit Counseling

One option that you have besides filing for bankruptcy is going through a credit counseling program. This type of program can help you come up with a plan to repay your creditors and get you back on your feet. When you hire a credit counseling company to help you, they will talk to all of your creditors on your behalf. They will negotiate an interest rate reduction and a payment plan for you with each one. They will then compile all of this information and create a total package for you. You will agree to making a certain monthly payment for however many years it takes to get out of debt. You will then send your monthly payment to the credit counseling program every month. They will distribute it to the companies that you owe money to each and every month for you to ensure that the payments are on time. 

This option will affect your credit a little bit, but not nearly to the extent that a bankruptcy would. Although it will take a little work to repay your creditors over a long period of time, it is usually better for you in the long run than a bankruptcy would be. 

2. Debt Settlement

Another option that you could look at is negotiating a debt settlement with each of your creditors individually. If you have not made your payments in a few months, your accounts could have been turned over to a debt collection agency. When this happens, they will usually be willing to work with you on the repayment process. If you have a lump sum of cash, they would most likely be willing to take a cash settlement from you. This will allow you to settle the debt for much less than you owe. You will take a hit on your credit, but again, it is better than going through bankruptcy. 

3. Home Equity Loan

If you have not yet hurt your credit too severely, you may be able to take out a home equity loan and help yourself out of this situation. When you own a home and have been paying on it for a number of years, you will have accumulated some equity in the property. You can borrow against this equity, pay off your debts, and just make a single payment towards debt every month. This monthly payment will be lower than what you were paying and the interest is tax-deductible. 

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