When one is facing vast amounts of debt that they do not know how to pay, it can be stressful. Being harassed by creditors because of unpaid debt can be embarrassing, especially if you previously were in a position to pay them. When facing all these financial challenges, filing for bankruptcy may be an obvious choice, given the circumstances. However, there are other better alternatives that you can explore before deciding on bankruptcy. With an experienced bankruptcy attorney, you will be able to understand the various options available and explore the best one for you. We at the Los Angeles Bankruptcy Attorney can help in resolving your financial challenges and decide on the best choice possible.
Various Options to Filing Bankruptcy
The reason one would wish to file for bankruptcy is when they are faced with overwhelming debt, and they feel it is impossible to repay it. Financial challenges happen to the best among us, and your creditors understand that. Most creditors are always willing to discuss various options of getting their debt paid as opposed to losing their money when you file for bankruptcy. Here, we will discuss multiple options you should consider before making your decision to file for bankruptcy. These are:
- Modification of loans
- Negotiating debt
- Short sales
- Consolidation of debt
- Debt settlement
We will embark on discussing each option in greater detail for you to identify which one is best suited for you. Each person faces unique challenges depending on their circumstances, meaning one option may not be suitable for another person. Bankruptcy, for many, seems like the most viable solution to get out of debt. However, it is vital to make informed decisions when one has all the facts or information in place.
Modification of Loans
The current economic times are tough, and most people can feel its effects. For the majority of individuals, their most significant debt is usually their mortgage payments. Many people are falling behind in their repayments while others are unable to make any payments. This has resulted in the falling of property value that has left many property owners in debt.
Unfortunately, the debt is typically more than what their house is worth. In case you are facing this as your challenge, talking to a Los Angeles Bankruptcy lawyer can help you find a solution.
Instead of filing for bankruptcy, it may be more viable to negotiate for modification of your mortgage repayment. This can offer you great relief in the repayment burden while you still own your home. This process involves modification of your loan or mortgage terms to enable you to meet your monthly repayment more comfortably.
For this to be viable, you must demonstrate your financial challenges. These may include a decline in the property value, loss of income, or adjusted rates that are making it difficult to make payments.
Modification Types
There are various ways modification can be done. For starters, the reduction of interest rates is one way to modify your loan. The option in this can be moving from floating interest to fixed rates. Although rarely done, it can be achieved by the reduction of the principal amount you pay monthly. Extending the mortgage term is another way to modify your loan. When the repayment period is increased, the amount paid reduces, making it easier for you to make payments.
You can also negotiate to have the penalties on late payment waived to reduce your burden. Another way may involve understanding your household income and modifying your mortgage to suit it. One can put a cap on their loan repayment in consideration to a certain percentage of their income.
Dealing with lenders can be difficult and frustrating. A bankruptcy lawyer can help you with your application by ensuring the information you give can result in favorable consideration.
Short Sales
A property owner facing repayment challenges may sometimes enter into an agreement with their lenders to sell the property at a lesser amount than what is owed. This is what is known as a short sale. When a person is unable to repay their loan, they can propose to their lenders to sell the property and submit the proceeds to them to offset the debt. This can result in the satisfaction of the debt, but other times, the property owner may be required to pay the deficit.
The decline in the housing market as a result of a weak economy has resulted in increased short sales. Instead of filing for bankruptcy, considering a quick sale of your property may be a better option. Just like a foreclosure, however, a short sale will affect your credit report. However, it is easier to regain your credit after a short sale as opposed to a foreclosure. The relief of being out of debt may be more advantageous as opposed to the small disadvantage of going through a short sale.
Negotiating Debt
Debt negotiation is the process by which you discuss with your creditor about the possibility of reducing your debt. This is based on the assumption that your creditor may be willing to listen and reduce your debt so that you pay a lesser amount as opposed to losing the total amount. If your creditor agrees on your proposal, you must be ready to make a lump sum payment. Once this is done, your debt would be considered to have been fully paid.
Negotiation on how to pay your debt may be a better financial solution than the filing of bankruptcy. However, not every kind of debt would qualify for a reduction. Some debts, such as alimony payments, child support, student loans, and taxes, cannot be reduced. The typical liabilities that can be subjected to negotiation may include credit card debt, medical bills, car loans, and mortgages.
Negotiation to have your debt reduced is not as easily achievable. It is advisable to seek the services of a bankruptcy lawyer to strategize on the way to negotiate. If you go into a negotiation meeting when you are not well prepared, your creditor may not take you seriously and end up refusing to negotiate. Always present all the facts of your financial situation and challenges to your lawyer. And trust him or her to formulate the best strategy to negotiate on your behalf.
Consolidation of Debts
The merger of debt is another alternative to filing for bankruptcy. When your debts are consolidated, it may make it easier to pay them because you have better control over them. This is an excellent option for a person with credit card debts that come with high interest. Consolidating them together to make a single payment each time with lower interest rates can be helpful to your financial challenges.
Some consolidation measures are easy to do. You can request to have your balances transferred to one account that charges lower interest rates. You can also take advantage of credit card companies that offer these low rates or no interest at all. If your debt is significant, you can seek the services of a lawyer to help you negotiate the debt consolidation to your advantage.
For individuals with significant debt, debt consolidation is beneficial because it adds to their credit report. The impact of consolidating your debt also does not have a substantial effect like that of bankruptcy. The process is discreet, while one is able to pay off their debt at a rate that is comfortable for them. A bankruptcy, on the other hand, brings many stigmas, while debt consolidation doesn’t have to be known even by your employers.
Having a lawyer that can help you negotiate for debt consolidation is an added advantage if you want to be able to manage your debt. Speak to a bankruptcy lawyer and let them advise you on the various options available before you file for bankruptcy.
Debt Settlement
This is another favorable option for bankruptcy and can help you to get back on your feet again. It is also referred to as debt arbitration, credit settlement, or debt negotiation. This happens when you work with your creditors to settle on a lesser amount. Some creditors may offer you a monthly settlement amount to ensure the debt is continuously serviced at a rate that is affordable to you. However, some may ask that you give them a lump sum amount initially and agree on a period when the debt will be fully paid.
Instead of filing for bankruptcy, opting for debt settlement is a better way to regain your financial freedom. If you have huge debts that have made you consider filing for bankruptcy, consider debt settlement instead. This will enable you will find the financial relief you are looking for.
Selling of Assets
When you find yourself in debt that you cannot service, you may need to consider selling off some assets. Some people have many household items or appliances that they do not need. Consider having a garage sale and sell all the things that are in excess. For instance, you do not need to have two microwave ovens or television sets in each room. A garage sale may seem insignificant, but depending on the assets you have accumulated, it may be a good idea to sell them.
Maybe when your business was doing well, or you were riding high in your career, you wanted to buy every car of your dreams. What starts as a need ends up being an extravagance. Evaluate your needs in your home and get rid of the extra vehicles and luxuries that you can live without. If you have new houses that are not necessary, consider selling some to offset your debts. When you had a consistent income, and it suddenly comes to an end, it can be frustrating and hard to let go of things you value. However, material things should not hold you captive.
Consider getting the other assets that you can do without valued and exchanged for money, and when you are back on your feet, you can start again to replenish. Holding on to things can lead to severe debts when one does not want to let go. If you have assets that can help you get over your debt, it is better to sell them than to file for bankruptcy.
Change Your Lifestyle
The lifestyle one leads can be the reason for debt. If you are a person that likes eating out in restaurants with your family, consider home-cooked meals. The savings a person would make from these simple lifestyle adjustments may not seem much, but in the long run, they make a huge impact.
Changing your attitude and your relationship with money and things will also help with your debt. Most people buy things not because they are needed but because they want them. For instance, have a look at your closet and see the shoes you wear or clothes regularly. You may be surprised to find things that you bought and forgot about them and never bought them. Think carefully before making a purchase and ask yourself if necessary.
Ask your family members to practice mindful spending, as well. From the food you buy to the things you purchase, there must be a genuine need for them. Do not buy stuff because it is fashionable or out of hype. Learn to be mindful and start saving while directing your savings towards paying your debt.
If you are living in an unnecessarily big house than you need, you may need to move. If your home is bigger than you need, you can consider selling it and buying a smaller house and the difference to go towards your mortgage repayment. A big house not only requires enormous monthly mortgage repayments but also the cost of maintenance is high. Adjust your lifestyle to suit your income and avoid accumulating more debt.
Reduce Your Credit Cards
Credit card companies are in the business to make profits. Most of them will give you offers so that you subscribe to them. Having many credit cards will mean you have a bigger window of expenditure. Consider having debit cards instead because they confide you to spend what you have. If you find it necessary to have a credit card, avoid having many but a maximum of two. Check on your credit limit and avoid it being so high. Remember, when you spend on credit, you will still have to pay the debt.
Use Cash More to Make Purchases
The temptations in the marketplace are many. If you go for grocery shopping with a credit or debit card, you are likely to be tempted to make unnecessary purchases. If you are already in debt, your goal would be to pay the mortgage and avoid more liability. You can prevent the possibility of filing for bankruptcy by taking care of your spending.
When you go shopping, go with only the cash you need. This helps control your expenditure because you will not buy things that you do not need. This will help you reduce your credit card debt and live within your means.
Have a Budget and Stick to It
You can avoid getting into debt by making a budget and sticking to it. However, when you are already in debt, you may wonder how this can help. Establishing a budget is essential for any person facing the possibility of bankruptcy and can help you avoid it altogether. With a budget, you can realize that you can live on much less than you previously did.
After establishing your debt portfolio, making a monthly budget can help you ensure you service your debts as opposed to filing for bankruptcy. Set aside the amount that goes to paying your debt and have discipline around it. The lack of financial planning accumulates most debts. If you are unable to plan your finances well, you will continue accumulating debt that may make you consider bankruptcy. If you are already facing bankruptcy, you may consider instead creating a budget and ensuring you stick to it.
When you go to negotiate for debt settlement, this is an important aspect that your lenders may want to know. Their interest is that you can pay their money and how you plan to pay for it. Creating a reasonable budget will convince your creditors of your seriousness and hold you accountable for it. To successfully pay off your debt, you must have a working budget.
Standing Order
This is another strategy that can help you offset your debt more comfortably as opposed to filing for bankruptcy. Instead of filing for bankruptcy, you can show your lenders your willingness to offset the debt by setting aside a specific amount that is automatically credited to their account. This helps give you discipline and ensure your debt is consistently paid instead of accumulating more debt. The regular payment of your mortgage will eventually get you out of the debt that you thought cannot be managed.
Get Adequate Insurance
Most bankruptcies are a result of medical debts. Acquiring adequate medical cover is vital in avoiding debt that may lead to bankruptcy. The majority of people invest in auto and home insurance but inadequately neglect to invest in a medical cover. Medical bills can become so challenging that one may consider bankruptcy. The good news is that you can negotiate to pay off the debt over time, but the best remedy would be to get adequate insurance cover.
Find a Bankruptcy Lawyer Near Me
When a person is overwhelmed by debt, they feel the most comfortable and viable option is filing for bankruptcy. However, there are many consequences to this move, one of them being the negative effect on your credit report. Avoiding debt is better than the assumed, more comfortable option of filing for bankruptcy. Many options exist to help you reduce your debt and even get rid of your current debt. Before deciding to file for bankruptcy, talking to a bankruptcy lawyer is essential to exhaust the possible options. At the Los Angeles Bankruptcy Attorney, we can give you much needed financial advice and help you stay out of debt. Call us at 424-285-5525, and let us discuss your financial options together.