Alternatives to Personal Bankruptcy
- Debt consolidation is a program you can use as an alternative to bankruptcy. Choose a company to provide your debt consolidation program. This company will gather all of your information about your debts and then contact each company to whom you owe money. The debt consolidation company will negotiate a lower interest rate on each of your debts and then consolidate all of your debts into one monthly payment. The payment will include the service fee that the company collects monthly to provide this service to you. Debt consolidation programs typically last for four to eight years, depending on the amount of debt you have and the restructured terms for payoff.
When you enter a debt consolidation plan, you must give up all credit cards you are paying off through the plan. This is to keep you from running up new debt, which may prevent you from fulfilling your obligation with the debt consolidation program. - Another alternative to personal bankruptcy is debt negotiation. When you enter a debt negotiation program, you stop making payments to your creditors and instead make payments to the debt negotiation company. The debt negotiation company contacts your creditors, informs them that you are in the program and arranges a payoff of your current debt. Usually the company will agree to settle for about half the amount you owe. Once the debt negotiation company reaches an agreement with your creditors, the debt negotiation company pays the company off in one lump sum from the amounts you have paid to them. One of the conditions the debt negotiation company places on each company is to mark the debt paid in full with the credit bureau. However, during the negotiation time your credit score will be very low. Once it is over, your credit score should improve and new loans are possible.
