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Dealing with debt outside bankruptcy: consider your options before filing

For struggling debtors, addressing the problem of burdensome debt can be a challenge, not only because of the lack of financial resources, but also because it can be confusing to determine the best way to deal with the debt itself. Certainly, bankruptcy can be an option if thing get bad enough, but bankruptcy is not something to take likely and it is better in some cases to work to avoid it.

There isn’t any one best way to address debts, since each debtor’s situation will be slightly different. For debtors who have significant liquidity in real estate or other personal property, selling property may be able to generate money to pay off creditors, at least to an extent. Another option is borrowing money from friends or family who are willing to not charge interests. This can work for some people, but still creates another debt that has to be addressed later on. 

Sometimes, consolidating loans to a single loan with a lower interest rate can provide some relief. For many people, their home mortgage is their biggest bill and restructuring or refinancing it can help reduce monthly payments. Cutting costs can also help to an extent, depending on the debtor’s current income and other spending.

For debtors who can’t get back on track with these more ordinary means, it may be necessary to look into options to settle or negotiate debts. This can be done on one’s own, but it can also be done by working with a counseling agency who works with the debtor’s creditors to come up with a monthly repayment plan.

For debtors who have tried these options without success, or for debtors who have quickly found themselves in a very serious financial crisis, proceeding to bankruptcy may be the best option. Realistically, most people who are seriously thinking about bankruptcy have tried many of these options. Debtors who are beginning to seriously think about bankruptcy should consult an experienced attorney as soon as possible, first of all to have their case evaluated and to determine their options, and secondly to obtain guidance in proceeding with a bankruptcy filing. 

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