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Filing for bankruptcy is a valuable tool for borrowers facing unmanageable debt, but it can have a negative impact on your credit score and require you to surrender some of your assets. Due to the long-term negative impacts of bankruptcy petitions, debtors should always explore other options before liquidating or restructuring their debts. The bankruptcy alternatives below may provide a path to financial solvency, although they may not be the best choice for every situation.

3 Common Alternatives to Bankruptcy

1. Consolidating Debt

If the principal balance of your accounts refuses to go down, or actually increases after several months or years of on-time payments, try consolidating all your debts under a single loan. Depending on the interest rate you receive, you may be able to lower both your monthly payments and the total amount you pay over the life of the loan. However, many struggling borrowers already have several negative marks on their credit reports, which can make securing a loan difficult.

2. Loan Modification

filing bankruptcyIf short-term financial problems left you behind on your mortgage, a loan modification could help you catch up on missed payments without filing for bankruptcy. In some situations, you may be able to negotiate a lower interest rate or reduced rate with your lender, who may be willing to add your past due balance to the principal of the loan. However, obtaining a loan modification can be time-consuming, and it won’t help with credit cards, auto loans, or other debts.

3. Debt Settlement

Many lenders are willing to settle debts for less than you owe, in exchange for a single lump sum payment. Most borrowers rely on third-party companies to collect the funds and negotiate with lenders, which can be a lengthy process that may not reduce your expenses. If you’re considering debt settlement, work with a reputable provider who offers a guarantee.


 

If you’re considering filing for bankruptcy, Brian Kawamoto Attorney offers the in-depth experience you need and a reputation you can trust. For over 25 years, this law firm has provided guidance to distressed borrowers throughout Honolulu, helping them reclaim their financial stability. Visit their website for more on their debt relief services, or call (808) 486-6107 to speak with an attorney and schedule a consultation today.

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