No one wants to file for bankruptcy, but sometimes things go wrong. For many Americans, health problems and medical bills are the cause of financial ruin. Maybe your business fails, you lose your job, or your bills just pile up faster than you can pay them. Slowly but surely, the creditors start pounding at your door, and you’re afraid to answer the phone for fear that another collection agency will be demanding money.
If you’re feeling desperate about your financial situation, and considering filing for bankruptcy, here are some steps to consider before, during, and after the process, and we’ll tell you what it costs—because even declaring bankruptcy will cost you money.
First, Consider The Alternatives
Renegotiate Your Loans
Talk directly with your creditors, explaining your situation. Try to renegotiate your loans for better terms: a longer payback time, smaller monthly payments, or a lower interest rate.
Consolidate Your Loans
Loan consolidation agencies have special arrangements with all the major creditors and are able to offer lower loan interest rates than are usually available to the public. They will ask you to destroy all credit cards involved in the debt consolidation. They will be responsible for paying your creditors, while you pay one low monthly payment to them. Your new low-interest loan will be payable over 4 to 8 years. These companies are particularly good for people with a lot of high-interest credit card debt. Carefully research these companies before taking the plunge.
Debt Negotiation Company
A company representative will approach your creditors on your behalf, and try to work out some kind of deal. Creditors will usually agree to a new plan, since they know that once you declare bankruptcy, they may not get paid at all.
Low Interest-Rate Home Equity Loan
If you have substantial equity in your home, you can consolidate all your debts into one monthly payment. Home loans typically have lower interest rates and longer repayment periods than unsecured debts and loans. Your monthly payment will be smaller, giving you the opportunity to regroup, create a budget, and hopefully get back on your financial feet.
