How safe are bankruptcy alternatives?

You may be unhappy at the prospect of bankruptcy due to fear, shame and other negative emotions. The truth is that bankruptcy is more beneficial than you think, offering asset protection, debt reduction and an end to creditor harassment. However, you may still want to consider other options first to see which approach is best for you.

Some of these are safe, but others are risky. As you consider alternatives to bankruptcy, carefully weigh the pros and cons of each to ensure you help your situation instead of harm it.

Debt settlement

This entails a company settling your debt with creditors to reduce the amount owed. Unfortunately, this option is most often a scam. The Consumer Financial Protection Bureau does not recommend using debt settlement services due to them not being effective and usually leading to more debt. This happens due to upfront costs, hidden fees, accrued interest and no legal obligation for creditors to cooperate.

Debt consolidation

With consolidation, you combine your debts into a single amount to pay off. For example, you can transfer all credit card balances to one card or take out a loan to close all debts and then just repay the lender. This makes repayment easier to manage and may save you some money. However, it is also a risky option and may cost you more in the long run.

Loan modification

If your primary financial issue is with a specific loan, you may be able to modify the terms, such as obtaining a lower interest rate or extending the time you have to repay. This can make payments more affordable, and the company still regains its money.

Credit counseling

Through credit counseling, a certified counselor helps you devise a plan to handle your financial situation. Assistance can include creating a budget and giving you resources and tools on how to better manage money. This education also comes with filing for bankruptcy.

No Comments

Leave a comment
Comment Information

Prescott Pearson & Tande, PA
443 Old Highway 8 Northwest, Suite 208
New Brighton, MN 55112

Toll Free: 888-366-0827
Phone: 651-968-8096
Fax: 651-633-7562
New Brighton Law Office Map