If dark clouds of bankruptcy are gathering on your household’s horizon, there are alternative avenues that should be explored before taking that final financial plunge. Sometimes, with diligence and planning, these alternative approaches can work well enough to alleviate the need to file for bankruptcy.
To illustrate some of these options, here is an overview of bankruptcy alternatives and how they can be used to your advantage.
Investigate Credit Counseling Services
There is an overabundance of credit repair companies on the market right now promising that they’ll help you get out of debt quickly and easily. The problem is that these commercialized debt-reduction companies have their own bottom line motives buried beneath their miracle-promising messages. Beware of these services because they don’t necessarily have your best financial interests at heart, and a portion of what you pay may end up lining their pockets instead of paying down your debt.
There is an excellent non-profit organization available in most states that can seriously help you get debt under control. It’s called Apprisen Financial Advocates, formerly named Consumer Credit Counseling Services (CCCS). Easy-to-understand online resources are available at Apprisen’s website, as well as facts regarding mandatory bankruptcy counseling. Information at the site explains, “The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 requires consumers to attend a credit counseling session to discuss their financial situation and learn about alternatives to bankruptcy before filing. This is known as Pre-filing Counseling.”
Typically, a counselor will review your income versus your debt, and devise a workable plan to pay off debts. In some instances, the agency may be able to negotiate reduced settlements on your behalf.
Make Arrangements With Utility Companies
Sometimes huge, accumulated heat and light utility bills can seem insurmountable and prompt a person to contemplate bankruptcy. What you might not know is that most utility companies offer payment plans, where the balance owed is divided by a certain number of months to allow for payoff. This monthly amount is then added to each bill until the old debt is brought to a zero balance.
If you’re not able to come to an agreeable arrangement, then make contact with your state’s Public Utility Commission (PUC) and explain your situation. Sometimes the PUC is able to intervene to ascertain that a reasonable payment arrangement can be established.
Scrutinize Every Non-Essential Luxury
Do you have cable TV? How much do you spend on partying every month? Is there a bus or train that you could ride to work to save on gasoline costs? These are questions that need to be asked when trying to decide whether or not to file for bankruptcy.
For example, if you’re spending $75 each month on cable television, consider ways to live without it. Hook up an old VCR and program it to record various shows you like while you’re not at home so you’ll have something to watch when you’re in the TV mood. If you spend 20 or 30 bucks every Friday evening enjoying happy hour with your friends, shift your party habits. Invite people over to your place for a BYOB instead and buy a case of beer or a bottle of wine. Use the savings to pay down a credit card or utility bill.
Analyze Your Housing Situation
The notion of moving house is thoroughly daunting, but is it more frightening than seeing your name in the paper under the “bankruptcy” column? Moving isn’t always the solution, but sometimes downsizing can make a tremendous financial difference in monthly housing costs as well as utility and travel expenses.
If you are living in a purchased home, compare your monthly mortgage payment against monthly rent costs for apartments and houses that could suit your lifestyle. If the difference is several hundred dollars or more, maybe it’s time to think about moving. In the process, you can always consider finding a place closer to work to cut down on travel expenses. If you’re facing foreclosure, consider a short sale to get out from under accumulated mortgage debt. There are many insightful advice articles on the internet that explain the short sale process, or consult with an attorney to explore this debt-relieving option.
Set Up Settlements
It’s an investment of time, effort and energy, but negotiating some of your debts down to a reasonable level is an achievable goal. To do this successfully, you’ll need to be thorough and carefully cover all of your bases.
Contact the company or collection agency you owe and ask for a lump sum payoff figure. If it’s a number you’re comfortable with, ask them to put it in writing. Make sure you receive a legitimate, signed document spelling out each detail of the payoff terms before sending any money. Operating on faith in these circumstances is not usually a wise choice.
Start with the smallest debts first, and knock them off one at a time, smallest to largest. If you don’t have resources of money to pay these debts, consider using creative ways to conjure up the cash, some of which are mentioned in the next step.
Sell Everything You Don’t Need
It’s okay to dig through attics, closets and basements to gather an inventory of items that you truly don’t need. The rule of thumb is that if you haven’t used something within the past year, chances are you don’t need it.
Lots of people make extra money by conducting yard sales and by setting up eBay auctions. Successful yard sales can be held in conjunction with neighbors or solo, with newspaper ads or homemade magic marker signs on busy thoroughfares. They can also be held for one or two days, depending on weather and how many items are being sold.
For eBay, all you need is a digital camera, internet access and a decent computer. Take flattering photos of your items, and be sure to post at least one picture with each typo-free ad. Start prices on the low side to stimulate bidding, and watch as your junk is transformed into cash. When shipping items, charge a fair price that includes good packaging to ensure safe arrival, and use confirmation notices to enable tracking.
Segregate funds raised through these home-based selling efforts to be sure they are applied to debts.
In closing, it’s best to explore every possible alternative before heading to bankruptcy court. Declaring bankruptcy is a credit-crushing event, and it is a financial wound that takes years to heal.