Struggling with debt can be frustrating, stressful, and depressing. If you feel like debt is sucking away your money and happiness month after month, it may be time to look for options to get rid of it once and for all.
As you look for options to get out of debt, you’re likely to run into bankruptcy sooner or later. This is one of the most effective solutions for getting out of debt and obtaining a fresh financial start. Still, it can also have negative consequences that you should know about.
For example, after a bankruptcy filing, you will lose all your credit cards, your credit score will be heavily affected for the next few years, it will be more challenging to get mortgages and loans, etc. Furthermore, you may have to sell some of your assets to get your debts discharged through this process.
However, in some cases, you may be able to opt for another debt relief option and avoid filing for bankruptcy in 2024. Read on to learn about the main alternatives to bankruptcy.
Debt settlement
A debt settlement consists of reaching an agreement with all your creditors to pay less money than you owe to clear your debt. If you don’t have many creditors and can still come up with the money to pay them all, this may be a practical option.
However, you may be wondering: Why would your creditors accept less money than you owe to settle the debt? The answer is simple. If you are in default, your creditors are more likely to accept a debt settlement. If you file for bankruptcy, they run the risk of receiving nothing at all.
You are free to use a debt settlement company or reach an agreement on your own with each of your creditors. However, keep in mind that this alternative could harm your credit score, although less so than bankruptcy.
Debt consolidation
On the other hand, you could try debt consolidation if your financial situation allows you to do so. Through this method, you can group your debts to reduce the amount of interest you have to pay.
You can consolidate your debts in different ways. The most common method is to take out a debt consolidation loan, which combines several separate debts into one loan. The debtor will have to pay the same amount of money but will reduce the interest rate. This option is usually available to those with a good credit score.
However, if you are considering bankruptcy, you may not be in a position to pay all of your debts in one lump sum. So, you may need to consider other options.
Borrow money to pay off debt
Asking friends and family for money might not be pleasant, but it is an alternative to pay your debts in case of an emergency. If someone you know is willing to lend you money, it may be an opportunity to rebuild your finances without dealing with various creditors.
However, this should be one of your last options. Borrowing money is often uncomfortable, especially if you have had debt problems in the past. Should you choose to go this route, treat it like a bank loan. Do everything possible to pay off your new debt in the shortest time possible.
Find a way to earn more money
Earning more money can help you pay off your accumulated debts. Getting a second job, or finding another way to make money, may keep you from going bankrupt.
Today, there are many ways to make money in your spare time. The gig economy has prompted the growth of rideshare apps, such as Uber and Lyft. Plus, the COVID-19 pandemic has increased our reliance on delivery services. You can try to earn a few extra dollars through these methods, any other alternative that allows you to make additional income.
Change your lifestyle
If your lifestyle makes you spend more than you can earn, maybe it’s time for a change. You might be surprised at what a little planning and budgeting can do for your finances.
Creating a monthly budget can help you reduce your expenses. Then, you could put the extra money toward paying off your debts.
Plus, learning to live on a budget will help you avoid debt in the future, preventing you from being at risk of bankruptcy later on.
Sell some assets
Selling some assets to pay off your debts may be a good idea. Sell some things you don’t use or a non-essential asset for which you could get good money, such as a stamp collection. You can do this through a garage sale or by posting your stuff on eBay, Craigslist, etc.
Keep in mind that while you may have to sell some assets during bankruptcy, doing it on your own allows you to stay in control of the situation at all times.
However, in some cases, you may be able to obtain a debt discharge through bankruptcy without selling anything at all. Consult a local bankruptcy attorney for more information.
Don’t do anything
Doing nothing is a decision as well. Simply put, if you have nothing to lose, then the debt collectors won’t be able to take anything from you. If you don’t have any expensive assets, and your only income is through social security or disability benefits, you could choose to do nothing.
Since your income is protected, there is nothing your creditors can do to collect your debt. However, they may continue to contact you and send you letters.
Sometimes bankruptcy is your only option
Sometimes, bankruptcy will be your only choice to get rid of your debts and regain control of your life. However, this won’t spell the “end” of your financial life. Although bankruptcy has disadvantages, it also has many benefits that will help you eliminate most of your debts and recover your peace of mind. After the process, you will be able to rebuild your finances from scratch.
However, filing for bankruptcy can be more complicated than it seems. That’s why working with a Los Angeles bankruptcy attorney, such as KT Bankruptcy Lawyer, might be your best option if you want your filing to be a success.
This Los Angeles Bankruptcy law firm offers completely free initial consultations. So, feel free to contact them if you want professional advice on how to deal with your financial situation. Visit their website to learn more: kt-bankruptcylawyer.com