3 Alternatives To Bankruptcy Debtors Should Know About
Many people struggle with debt without knowing there are ways of dealing with debt. On the other hand, some think that filing for bankruptcy is their only option. While bankruptcy has helped many people regain their financial freedom, there are other strategies that people can employ to get back on their feet. Whether you should file for bankruptcy or employ another strategy depends on the specifics of your case. However, it would be best to keep in mind that, even though bankruptcy is not the only option available for people struggling with debt, it is often the best option for individuals struggling with overwhelming debt.
If you are not sure how to deal with debt, the following can be possible options for you. However, these other options are generally viable if you have the money to pay off most, if not all, of your debt. Additionally, these other options may not provide you with the same legal protection debtors are provided with when they file for bankruptcy.
Negotiating With Creditors
If you’ve missed several debt payments, the first and basic option for you may be to contact your creditors and try to come up with a payment plan. You can try explaining to your creditors why you cannot make your payments and then suggest a new arrangement. Many times, creditors accept such offers and cooperate.
When an individual negotiates with a creditor, they hope to pay less than they owe. For instance, if you owe a creditor $30,000, a creditor might accept a lump sum payment of $20,000. However, if a creditor accepts that, you will most likely have to pay them within a short period. If you don’t have the funds to afford a large payment or have several creditors, negotiating might not work in your favor.
Debt Consolidation Loan
This is a single loan you take to pay off multiple debts. This option can help you lower the total interest you owe on your debts and pay off your debts faster. After paying off your debts using a debt consolidation loan, you will just be left with the debt consolidation loan payment.
Before being granted a debt consolidation loan, you might need to provide the lender with collateral. For example, such a loan might require your home as collateral. Therefore, you should think long and hard before taking on this option. If you can’t pay back the loan or make late payments, you could lose your home.
Debt Repayment Plan
If negotiating with creditors and getting a debt consolidation loan proves difficult, you may try a credit counseling agency. Such an agency can help you create a debt management plan based on your income and debts. If you take on a debt repayment plan, your creditors may even be willing to lower your interest rates.
Generally, if you choose this option, you’ll be making monthly payments to the agency. Your credit counseling agency will then use your deposits to pay your creditors according to the payment schedule. However, one disadvantage of such an option is that a creditor can terminate the plan if you miss a payment.
Contact a Southeast Iowa Bankruptcy & Debt Relief Attorney
If you are in Iowa and finding it hard to handle debt or are unsure which option can help you manage your debt, contact a Southeast Iowa bankruptcy attorney at the Noyes Law Office to receive legal guidance.