Is Personal Bankruptcy Right for You

Deciding to file for personal bankruptcy is a major decision, and you’ll want to make sure you have all the facts before making your decision. To help you decide if personal bankruptcy is right for you, we’ve listed some alternatives to bankruptcy that you might consider. If any of these options apply to your situation, you might want to explore them before declaring personal bankruptcy.

Alternatives to Personal Bankruptcy

Though personal bankruptcy can give you a clean break from your mountain of debt, it is not the only option available. Here are some plausible alternatives to personal bankruptcy:

• Settling with creditors out of court. Generally, creditors will do anything to stop you from declaring bankruptcy, so they can be very willing to negotiate when they know you are considering personal bankruptcy as an option. You might be able to talk them into reducing your debt. Usually, these negotiations are best handled by professionals. Remember this will still have a negative effect on your credit.
   
• Debt consolidation. Using the equity in your home or other assets, you can get a debt consolidation loan to pay off your current debts. Of course, there is a huge risk inherent in home equity debt consolidation loans because, if you cannot pay it back, you could lose your home. Often the terms on home equity debt consolidation loans are much more reasonable than those of credit cards.
   
• Credit counseling services. Credit or debt counseling can be a wise first step in dealing with your financial troubles. Credit counseling services can do everything from offer budgeting advice to consolidate monthly payments or obtain interest rate reductions. The only drawback with credit counseling is that some people considering personal bankruptcy might not qualify because they will not be able to repay their debts even with more favorable terms. Credit counseling can also have a negative impact on your credit.