What Are My Options To Avoid Bankruptcy?
When you find yourself in a large amount of debt, it can be difficult to pay the money off and to find a way out of the situation. If your bills are overwhelming you each month, you may need to take drastic steps to make lasting changes to your financial situation. Here are three ways you can deal with your debt to avoid having to file bankruptcy.
Set Up a Debt Payment Plan
The first option you should consider is setting up your own debt payment plan. This is the best option, because it will allow you to pay off all of your debts and it does not hurt your credit. However, it can be very difficult to follow through with and it can take quite a bit of time depending on the amount of debt that you currently owe.
In order to start, you will need to list each of your debts, with the rate of interest and payment amount. Apply any extra money you have toward the debt with the highest interest and then work your way down the list. When you pay off one debt, you take the money you were paying on it and add it to the next debt on your list. This method works if you get on a strict budget and consider selling some items or taking on an extra job.
Working with an Agency
A credit counseling agency, such as Vine & Williams Debt Management, can also help you pay down your debts. The agency will work with you and your creditors to set up a payment plan that will work with in your budget. This is also called a consumer proposal. This happens before bankruptcy and it protects you from your creditors seizing your property to pay for the debts. The consumer proposal can either propose that you pay back a portion of your debts, or lower the monthly payments and extend the amount of time you need to pay on them. It does ding your credit a bit, but is considered better than bankruptcy.
Debt Settlement
Debt settlement is when you negotiate with your creditors to reduce the amount that you owe. This is usually an option if you are already behind on your debts. You can contact your creditor and negotiate a settlement yourself or you can use a debt settlement company. If you choose to use a company, be sure to research the different options, because some have better reputations than others. This option can help you pay the least amount to clear up your debts, but it can impact your credit report and make it difficult to borrow money at lower interest rates for a few years.
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