Bankruptcy Alternatives: Know Your Options

Bankruptcy. It's a fear facing millions of Americans struggling with debt. No one wants to file for bankruptcy, yet more and more people are considering this option in the wake of the recent financial crisis. If you file for bankruptcy, it can haunt you for years – making it next to impossible for you to buy a home or get a loan, and it could even affect your ability to get a good job.

First Choice Debt Resolution wants you to understand that there are other options available to you. Options that can help you to pay off your creditors, find financial freedom, and avoid bankruptcy. The most common alternatives to bankruptcy are Self Money Management, Debt Consolidation, Debt Management Plans, Credit Counseling and Debt Settlement. Understanding the differences between these programs is essential to making the right decision for your financial future.

Self Money Management

If you have less than $10,000 in unsecured debt, you may be able to avoid bankruptcy simply by changing your spending habits. You can tighten your budget, cut out unnecessary spending and even sell any extra things you own to free up more money and pay off your debts. There are many financial self-help books on the market that can give you good ideas on budgeting and living debt-free. You could also get help from a financial adviser or take a course on money management at your local community college.

Debt Consolidation

Most people have heard of Debt Consolidation, but few understand exactly how it works. Debt consolidation programs combine all of your unsecured debt or high interest credit cards into one account. This can usually – but not always – lower your interest rate. Also, you would only be making one monthly payment to the debt consolidation company instead of multiple payments to multiple creditors. If you choose debt consolidation, you will still be responsible for paying off the entire amount borrowed – plus interest. Debt consolidation programs often take the form of a secured loan, such as a home equity loan. It's a good idea to research any debt consolidation program carefully, as you may be putting your personal property at risk without realizing it.

Debt Management Plan

A Debt Management Plan (DMP) is a plan to repay debts that is often used by credit counseling agencies. In a DMP, you make a set monthly payment to the counseling organization. The organization then uses the money to pay off your unsecured debts according to a repayment schedule arranged with the creditors. If you are repaying your debt through a DMP, creditors will sometimes agree to lower your interest rates or waive certain fees. There have been some reports of certain organizations defrauding customers by taking payments and keeping the money deposited into the DMP. The FTC recommends that anyone repaying their debt through a DMP contact their creditors to make sure they have accepted the DMP before making any payments to the organization, and check their monthly statements to make sure the organization is making payments to the creditors as scheduled.

Credit Counseling

Consumer Credit Counseling is another alternative for individuals struggling to make their monthly payments due to financial hardships. Credit counseling organizations work with you in an attempt to lower your monthly payments by negotiating reduced interest rates and fees on your debt, but they do not help you lower the actual balances owed. While credit counseling may be a good option for some, it is important to research any organization thoroughly before signing up for their program. Many non-profit credit counseling organizations are actually funded by the credit card companies themselves, and collect fees from both you and your creditors.

Debt Settlement

Debt Settlement, also known as Debt Negotiation or Debt Reduction, is not a loan or a form of credit counseling. A Certified Debt Settlement Specialist works on your behalf to actually reduce the amount of money you owe to collectors so you can pay off your debts and get back on track. When you work with a trusted Debt Settlement company like First Choice Debt Resolution, you may be able to reduce your unsecured debt obligations by as much as 50%. Debt settlement is a good choice for those with a large amount ($7,000 or more) of unsecured debt in the form of personal loans, credit cards or medical bills. Our negotiations department can also help you stop harassing calls from collections agents by acting as an intermediary on your behalf. When you enroll in a Debt Settlement Program, you can experience the peace of mind that comes from knowing you are on your way to achieving financial freedom.

If you are overwhelmed with debt and considering bankruptcy, call First Choice Debt Resolution today. We offer a free Debt Reduction Analysis for consumers, and we can help you make sure you understand all of your options.