There are any number of reasons for falling behind on debt payments – sickness, family emergency, or unemployment – that can lead someone to consider bankruptcy. For some people, having a bankruptcy on their credit history would signify the ultimate failure in being responsible. Even at this advanced stage, there are many alternatives to bankruptcy, which can help debtors avoid the negative consequences associated with having a public bankruptcy on their credit record.

Bankruptcy is a Blemish on Your Credit History

High debt can be a tremedous burden that is associated with the following problems:

- Emotional stress
- Higher interest rates
- Inability to pay health care costs
- Avoidance of bill collectors.

Filing bankruptcy can lead to the following negative consequences:

- Loss of freedom
- Damaged reputation
- Bad credit rating
- Asset forfeiture
- Public record of failure.

Thus, most debtors carefully consider all of their alternatives to bankruptcy.

Increased Income

[advice-ad1]

Some people get multiple jobs in order to increase their income, so that they can pay all of their expenses.

Debt Consolidation Loan

Many debtors will borrow money from friends, family, and even loan sharks in order to make payments when they have fallen behind. The debt consolidation loan has a low-interest rate, which can be used to pay off high-interest debts.

Working with Creditors

When financial institutions value their customers, they will work with debtors who run into temporary challenges. Renegotiating the terms and conditions of debt agreements, so that they are acceptable to both parties (creditor and debtor), is a credible option; both parties can save money and retain control over the repayment process with an out-of-court agreement.

Credit Counseling

Credit counselors can help people learn good financial, budgeting, and economic habits. Carefully research the background of the credit counselors, because some work for the credit card companies.

Home Equity Loan

For homeowners, who have built up considerable equity in their houses, they can take out a tax-deductible, home equity loan to pay off credit card debts. Be careful, because when you use your house as collateral for unsecured debt, it can be endangered if you run into problems repaying the loan.

Mortgage Modification

Some financial companies are willing to restructure or refinance the mortgage in order to help the debtor prevent foreclosure. Mortgage and credit card payment workouts enable debtors to “skip a payment” or have a “longer grace period” before incurring penalties.

Beware of Scam Artists

Avoid scam artists who attempt to take advantage of your financial difficulties by charging upfront fees for “debt consulting” or “foreclosure” services. There are plenty of “free” consulting services available.

Know Your Rights with Bill Collectors

The United States has passed many laws that are very consumer-friendly and give debtors the right to view, control, and correct their credit records. These are some of the laws:

• The Fair Credit Billing Act (FCBA) enables debtors to challenge an inaccurate credit history.
• The Fair Credit Reporting Act (FCRA) educates consumers on how to correct credit information.
• The Fair Debt Collection Practices Act (FDCPA) assists debtors in ending bill collector harrassment.

The truth is that bill collectors are very limited in what they can do to you because of stringent consumer protection laws. Bill collectors are prohibited from notifying your employer, publishing your name, or taking your property. They can threaten to close your account, notify the credit bureau, or sue you.

Many bill collectors pretend to be sales representatives providing a “courtesy call.” Be careful of any information you give to strangers. Under the law, you don’t need to tell them anything.

Be Sociable, Share!

•