For financially distressed individuals, bankruptcy may seem like the only way out. However, a bankruptcy attorney will recommend it only as a last resort and not an initial solution. Fortunately, the alternatives below may be able to save you from debt.

How to Avoid Filing for Bankruptcy

1. Sell Assets

A Chapter 7 bankruptcy involves selling all your non-exempt properties, the proceeds of which will be used to pay your creditors. Rather than going through this court-approved process, you can gradually reduce your debts by selling some assets. Put up big-ticket items on the market, including jewelry, branded clothes, electronics, and furniture, and use the funds to pay off your debts.

2. Consolidate Debts

Debt consolidation is another option to consider, especially if you have a credit line or approved personal loan. Some banks and credit unions allow the transfer of debts and offer lower interest rates. This step also makes it easier for you since you only have to deal with a single bill.

However, be wary of providing collateral for unsecured consumer debt, as you may lose the property when you miss payments.

3. Negotiate a Settlement

Most creditors are open for negotiations, so take this opportunity to strike a feasible agreement with them. If you have a bankruptcy attorney, they may suggest debt settlement, an option that involves partial debt write-off.

Debt settlement eases your liabilities, but at the expense of worsening your credit score. When you settle, you have to pay the lump sum of your reduced outstanding balances.

Before resorting to settlement, try asking creditors about restructuring your loans with longer terms and lower rates.  

4. Opt for Credit Counseling

When negotiating by yourself doesn’t work, it’s time to seek help from a professional. Your bankruptcy attorney may know of a credit counselor who can help you develop an achievable debt management plan. They’ll coordinate with your creditors to come up with a payment structure you can keep up with for three to five years.  

If you’re considering filing for bankruptcy, consult Donald L. Spafford, Jr., Attorney at Law. Proudly serving the community in Honolulu, HI, he has provided top-notch legal counsel on debt relief, debt consolidation, and personal bankruptcy proceedings for over 30 years. Reach out at (808) 532-6300 to schedule a free consultation, or visit the website to learn more about his areas of practice.