If you find yourself burdened by an unmanageable level of debt, bankruptcy offers a path to discharge numerous financial liabilities; however, this comes at a considerable detriment to your credit standing. Before resorting to bankruptcy, it’s advisable to explore alternative debt relief options with our seasoned Rapid City Bankruptcy Lawyers. Please continue reading as we explore some alternatives to bankruptcy.
What is Bankruptcy?
Bankruptcy refers to a legal process that eliminates and repays debt through a court-mandated schedule. Upon filing for bankruptcy, the court issues an automatic stay, which demands the cessation of all creditor collection efforts. During the bankruptcy process, individuals may “reaffirm” any debt they wish to retain, such as a mortgage or automobile loan. Multiple chapters of bankruptcy exist, contingent upon the individual’s status, the extent of their indebtedness, and their ability to repay.
Filing for bankruptcy immediately impacts one’s credit score. On average, bankruptcy reduced credit scores by 130 to 200 points. Although bankruptcy remains on one’s credit report for up to ten years, its impact on the score diminishes over time.
What Are Some Alternatives to Bankruptcy?
While bankruptcy is indeed an option to consider, it may not be the sole avenue to achieving financial stability, nor may it be the most suitable path given your unique circumstances. A less drastic alternative might enable you to alleviate your debts and regain control of your life.
Once your debt begins to escalate, it’s advisable to seek guidance from a certified nonprofit credit counseling agency. These organizations can review your household cash flow and assist in formulating a budget and a strategy for financial stabilization. Depending on the severity of the situation, professional coaching from an experienced financial counselor may suffice to manage debts and avert bankruptcy.
If your circumstances necessitate more extensive intervention than judicious planning, credit counselors can still facilitate the prevention of bankruptcy by negotiating a program with creditors to reduce payments and resolve debt issues within a few years through a debt management plan.
If you anticipate difficulty in fulfilling your financial obligations but have not yet defaulted on any payments and your credit standing is at least fair to good, you may be able to circumvent bankruptcy through debt consolidation. This process entails transferring the balances of high-interest credit cards to a loan with a fixed monthly payment. Obtaining a personal loan or leveraging your home equity and utilizing the proceeds to satisfy credit card balances and other high-interest debts can reduce interest expenses and establish a singular, predictable monthly payment in lieu of multiple payments.
For more information, please don’t hesitate to contact an experienced attorney at 605 Bankruptcy. Our legal team is prepared to help you determine the best course of action for debt relief.
