Real Bankruptcy

Two Bankrutpcy Alternatives

You might want to explore these options before you file for bankruptcy.

Option 1 - Renegotiate Secured Loans

First of all, what is a secured loan? How is it different from all other loan types out there? Is it any different from a credit card debt?

The answer to the third question is: It is very different. In fact, a secured loan could not be any farther from a credit card debt.

Simply put, a secured loan is one where you are made to mortgage your property so that the lender can forcibly sell it to get its money back if you can’t repay.

Now, if you think that once you file for bankruptcy, you can escape all your debts and start with a clean slate (so to speak), well think again. Because not all debts can be discharged with bankruptcy. And one such debt is a secured loan.

Now, the thing with secured loans is that they usually involve large sums of money – generally the largest most people have. Your car and/or your house are secured loans. So even if you file for bankruptcy, these debts will neither lessen nor disappear.

A better option would be to try to renegotiate these loans with the creditors. That is, if your debt has not completely caught up with you and ruined your credit already. Or you could take the loan elsewhere.

Let’s say, for instance, that you have a home loan that is several years old. You can try to renegotiate for a lower interest rate on this. And depending on your principal balance and current terms, there is every chance that you can see your payment go down by several hundred dollars per month. That is money in your pocket which you can use to pay off other debts.

If your home loan has only a few more years left, you can also try to lengthen the period or ask for an extension so you can reduce your payments even more.

Option 2 - Debt Consolidation

If you are like most people, then you probably have multiple payments that you must make every month. From high interest credit card bills to car loans, house mortgage to doctor or hospital bills – all these can add up, forcing you to deal with serious money issues every month.

There is a way for you to deal with this instead of immediately filing for bankruptcy. Debt consolidation can provide some immediate relief from you high interest loans and debts. But be sure to run the numbers first. There isn’t much sense in consolidating debts if it cannot significantly increase your ability to pay.

For instance, you have a car loan that runs for 15 years. By computing your monthly payments and interest rates, you come up with $40,000, which is the total payments, including interest, you would have to make for the car loan. In addition to the car loan, you also pay $15,000 for items on a credit card if you pay the minimum for 30 years.

If you take a debt consolidation loan as a second mortgage, you can use the money to pay off other debts. In most cases, this could significantly reduce your monthly payments and even stave off bankruptcy proceedings.

There are, of course, several more options available that you can take to avoid bankruptcy. But the ones above are the easiest routes to take and the most convenient, not to mention most effective.

If you want, you can also ask for a professional’s help such as a debt reduction attorney or professional debt negotiation companies that can take your case to the creditors. There are also some communities that have volunteer organizations that can do some of the negotiation for you.