Debts are an undesirable thing that can leave one overwhelmed and frustrated, not excluding their ability to make all facets of one’s life a living hell. This is why a wide majority of people neck-deep in debt prefer to file for a Bankruptcy discharge as this will get rid of their debt. Make sure, before getting started, that you understand that bankruptcies change depending on where you’re located. For instance, if you are planning on filing for Chapter 7 bankruptcy in Wisconsin, it may look slightly different than filing for Chapter 7 bankruptcy in Alabama. Consider what your state’s requirements are before moving forward. Also, remember that, if you don’t qualify for Chapter 7 bankruptcy, but won’t be able to get rid of your debt with other forms of debt relief listed below, consider Chapter 13 bankruptcy instead.

When you file for bankruptcy, you will get a respite from all letters and calls from your creditors. Summarily, bankruptcy allows you to start on a fresh slate—isn’t that nice?

Just like most things, there are also disadvantages attached to filing for bankruptcy; one major demerit is that it hurts your credit score.

As such, if that is a sacrifice that’s too much for you to make, then you may want to consider any of these debt-relief alternatives:

1. Debt Payoff Planning

2. Debt Settlement

3. Debt Management

Alternatives to Bankruptcy

1. Debt Payoff Planning

As extreme as this may sound, it is possible to get out a debt you’re necked-deep in without bankruptcy or the other two options. But chances of that happening are very slim if you’re not far behind on payments and you don’t have enough disposable income to meet up with those financial obligations.

To use this method, follow these three vital steps:

a. Find Out How Much Debt You Owe

You may have debt collectors sending you mailers from PO Box 1280 Oaks PA or calling you from unknown numbers. The challenge can be that you don’t know how much you owe and who you owe money to.

The very first step you should take to get out of debt is to know the exact amount of debt you owe. Most people prefer to ignore their debt and assume that it doesn’t exist, but doing this won’t reduce your debt in any way. After doing this, you should take another step to calculate your debt-to-income ratio.

To determine the debt-to-income ratio, you should subtract your total debt owed from your gross annual salary. When you make this calculation, you’ll know the exact amount you owe and can now plan your payment.

If you don’t have a good knowledge of debt payoff, you can make use of a Debt Payoff application as it can be very helpful.

b. Do Away With the Patterns that Got You into Debt

The main cause of the financial problem is bad financial habits. If you’re an impulsive spender, even if you win millions of dollars, you will spend it all on irrelevant things and become broke in a jiffy. Another reason that can make you go broke quickly is if you take a loan without a stable source of income. However the basic problem here is that you’re spending above your income—once you avoid this, then you’ll be free of debt.

c. Make Enough Money to Pull You Out of Debt

There is no magic to getting out of debt; you only need to ensure that your income is higher than your spending. What it means is that the faster you want to get out of debt, the more your income should be higher than your debt. Have it in mind that you must earn enough to spend on your basic needs and also meet your financial obligations to your creditors. Although this might be a difficult step to take, with the right mindset and enough determination, it is possible. Below are a few tips that can make you get out of debt as fast as possible:

● You can sell off the things you no longer have use of. There are lots of platforms that you can use to do that—some examples are eBay and Craigslist. The only problem here is that it’s a one-off activity as you will soon run out of items to sell.

● If your employer allows you, then you should work some extra hours to earn more. You can also get a second job if you have extra time to spare. Some readily available jobs are waiting tables, babysitting, freelance writing, and driving for Lyft or Uber.

● Another option is to find another job that pays better or get a promotion at work.

2. Debt Settlement

The debt settlement method is good for those who are already behind in their debt payments. You may have seen numerous adverts on social media and mainstream media by debt settlement companies, and you’re wondering about what they do, here it is: Debt settlement companies are organizations that specialize in negotiating with creditors to accept less than the debtor owes. It involves paying the agreed sum in a lump sum, and the rest will be written off.

Just like any other method, debt settlement has its pros and cons which should be taken into cognizance before embracing the method. An example of the disadvantages is that it will hurt your credit score; as such, you should consider the debt settlement credit score impact. A debt settlement exercise can take as much as three years before a settlement is reached, apart from this, here are other drawbacks:

● For example, some creditors may end up not yielding to any debt settlement at all, since no law compels them to.

● Even if they agree to give you an audience, you won’t get outright forgiveness on your debt as you’re still required to pay a portion of the money. Although some adverts may portray the money you’ll pay as insignificant, you’re still required to pay a portion of the money that can be as high as 75% of the debt.

● Apart from what you owe, the debt settlement company will still charge you some percentage of the money owed.

However, as undesirable as those factors above are, you shouldn’t let that discourage you from seeking debt settlement. With debt settlement, you can lower your total debt owed and the interest rate attached. It also helps you to come up with a great strategy to settle your debts in fewer years than you would have settled them.

While Chapter 7 bankruptcy can be affordable, debt settlement may be the second cheapest option.

3. Debt Management

Debt management is a debt relief strategy where a non-profit company negotiates with the creditors to cut the interest rate on a loan. This debt relief method is more suitable for individuals who are not behind on their payment schedule, and the debt owed to unsecured creditors.

When all bills here are consolidated, you will be asked to make monthly payoffs that are significantly lesser than what you’ll have paid when all payments are combined. Also, debt management gives you a longer payment period.

Debt management is just one of those ways to reduce your debt payments. It will save you lots of money, both in fees and interest. At the end of the day, you want to find what will work best for you. If you find that bankruptcy may be the best option, understand everything that goes into it like; bankruptcy homestead exemption. Make sure you find out what you can on debt management.

Conclusion

Whatever you decide to do, know that taking steps towards debt freedom is the best move you can make. Keep in mind that there are a variety of options you can look into to begin getting out from underneath the mountain of debt. Make sure you are aware of the differences between the different options, as well as the differences between requirements and processes from state to state. So, if you are planning on filing for Chapter 7 bankruptcy in Colorado, you’ll want to be aware of the state-specific information that will determine what your debt relief journey would look like.