When faced with overwhelming debt, bankruptcy may seem like the only way out. However, before taking such a drastic step, it’s essential to consider alternative options that may help resolve your financial difficulties without the long-term consequences of bankruptcy.
Debt restructuring and debt negotiation are two popular alternatives that can provide relief and allow you to regain control of your finances.
Debt Restructuring
Debt restructuring involves modifying the terms of your existing debt to make it more manageable.
This can be done in several ways:
- Loan Modification: If you’re struggling to make monthly loan payments, you can request a loan modification from your lender. This may involve extending the loan term, reducing the interest rate, or even forgiving a portion of the debt. Loan modifications can help lower your monthly payments and make them more affordable.
- Debt Consolidation: Debt consolidation involves combining multiple debts into a single loan with a lower interest rate. This simplifies the repayment process and can result in lower monthly payments. You can opt for a debt consolidation loan from a financial institution or work with a reputable debt consolidation company.
- Credit Counseling: Credit counseling agencies can help you create a debt management plan (DMP). They work with your creditors to negotiate lower interest rates and more favorable repayment terms. Under a DMP, you make a single monthly payment to the credit counseling agency, who then distributes the funds to your creditors.
Debt Negotiation
Debt negotiation, also known as debt settlement or debt relief, involves negotiating with your creditors to reduce the total amount owed. This typically requires working with a debt settlement company or hiring a debt negotiation attorney.
Here’s how it works:
- Assessing Financial Situation: The debt negotiation company or attorney will assess your financial situation, including your debts, income, and expenses. They will then determine the feasibility of negotiating a settlement with your creditors.
- Negotiating with Creditors: The debt negotiation professional will contact your creditors on your behalf and negotiate a reduced lump-sum payment to satisfy the debt. Creditors may agree to settle for a percentage of the total amount owed, often forgiving a portion of the debt.
- Repayment and Settlement: Once an agreement is reached with your creditors, you’ll need to make the agreed-upon lump-sum payment. It’s important to note that debt negotiation may have an impact on your credit score, as settled debts may be reported as “settled” or “paid for less than the full amount.”
Berken & Cloyes: Your Debt Relief Partner
Berken & Cloyes understands the challenges of overwhelming debt and the desire for financial freedom. Our team of experienced bankruptcy attorneys will analyze your unique financial situation and develop a personalized strategy to negotiate with your creditors.
We will advocate on your behalf, aiming to reduce the total amount owed and provide relief from the burden of unmanageable debt.
To learn more about alternative options to bankruptcy and how Berken & Cloyes can assist you, contact us today at 303-623-HELP (4357).
Our compassionate team is ready to listen, provide guidance, and help you find a viable solution to your debt challenges.