Alternatives To Filing Bankruptcy

Eliminating debt isn't a one-shot deal - facing the consequences of accumulated debt can be a long and difficult process

. Although you have the option of filing for bankruptcy, this course of action isn't the best choice, as there will be long-term effects on such financial aspects such as your credit rating. There are a number of ways to manage a load of debt, with these methods having varying effects on your credit.

If you're still in good standing in terms of credit, you could try reducing what you spend by making drastic cuts, or simply changing the way you live to a tiny degree to fit your spending within your means.

You could try to sell a second car, and deposit the proceeds in a savings account or get the money to work for you by investing in stable sources of income. You could also sell your vehicle and downgrade to a smaller one that's going to cost less in terms of fuel, maintenance, and car insurance.

Apply for a loan from a bank or another reputable lender. You can ease the costs of debt repayment by extending the loan payment duration. If this fails, you can try getting a loan from family members or friends. Keep in mind that non-payment will get you deeper into debt, so ensure that you can shoulder the costs of payment if you get a loan.

You may also sell your current home, rent a new one, and use the proceeds from the sale to augment your finances. Typically, people who sell their homes downgrade to a home that's smaller and easier to maintain. Just make sure that you can handle the moving costs and property taxes, among other related expenses.

If you're nearing retirement age, you can also cash out your retirement benefits or 401K plan benefits for extra cash, although you may have to pay a large distribution penalty - one of the significant disincentives of cashing out early. If you can wait, get your benefits in full by cashing out at the normal age of retirement.

If you're really in the weeds, you can sell valuables such as jewelry or family heirlooms. This is a good short-term solution, which can help you cover the costs of immediate needs.

There aren't any easy, sure-fire ways to get out of debt. Obtaining another loan, downsizing your car or home, and using your retirement plan benefits can help you eliminate debt safely. Remember: getting out of debt doesn't always mean that you have to file for bankruptcy.

by: Carina Smith

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