Alternatives to Bankruptcy
By: Jim Altison

In the United States, until the Congress has passes the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, over 95 percent of all the bankruptcies were filed by the consumers, which had amount to over 1.5 million cases a year. There are many reasons why people file for bankruptcy. However, for the many, divorce, an unexpected loss of a job and health reasons are the main reasons.

Bankruptcy should be considered as a last resort. In addition to staying on your credit report for ten years, the passage of the 2005 Bankruptcy Abuse Prevention and Consumer Protection Act has made significant changes to bankruptcy law while limiting the financial relief factor for the consumers. There are also certain types of debts that bancruptcy do not eliminate such as; child support and maintenance fees, student loans and back taxes owed to IRS.

Before filing for bankruptcy, one should consider the alternatives methods. 1)Contacting Creditors- As a first step you should try to contact your creditors and try to give them the reasons why you are not able to make your payments on time. You would be surprised to find that most of the are willing to work with you to get you back on track. The last thing is they want from you is to file bankruptcy.

2)Consumer Credit Counseling Services- In many occasions Credit Counseling Services have proved to be very helpful. In addition to offering workshops on topics such as budgeting, credit, and debt management, they may be able to help you by negotiating with creditors and be able to get you a reduced financing charges and/or lowered monthly payments.

3)Debt Consolidation Loans- You can start by applying to your bank or credit union about consolidating your debts into one loan. This consolidation loan will be at a much lower interest rate, resulting in lower monthly payments. However, the rule of thumb is to stop buying on credit and avoid new credit purchases on all those zeroed credit card balances.

It is crucial for you to keep some of your payments current while you are working things out through the above mentioned alternative methods. Mortgage, rent and car payments should be prioritized to avoid foreclosure, eviction or repossession. You must also be very careful and not pay any fees to get your credit score fixed. There is a difference between the Consumer Credit Counseling and paying for Agencies to fix your credit report. The latter is usually a rip-off and you could find detailed information on fixing your credit report yourself, for free.

Whether you decide to file for bankruptcy or not, it is vital for you to get yourself educated on the new bankruptcy law. You can easily gather basic and valuable information through the internet. Also you can visit your local library or bookstore and look up for information on the subject. If you want more details, you definitely should contact a bankruptcy lawyer. These trained professionals are well informed on the subject of bankruptcy, and be able to give you detailed answers to your questions while assessing your financial situation.