If you’re ready to start a new chapter in your financial life, now is an excellent time to start looking at your options for repaying debt, cancelling debt or negotiating your way out of debt. There are options like bankruptcy that may help you resolve your debts quickly, but there are also other options, like negotiating with creditors or offering to settle a debt with collections, that could help you eliminate debt without bankruptcy.
Before you elect to use bankruptcy to get out of debt, it’s worth considering other options. Here are three things you might want to do before deciding that bankruptcy is right for you.
- Try the snowball or avalanche methods to pay off debt
Either the snowball or avalanche methods can help you pay off debt. With the snowball method, you pay off your lowest debt and then apply the payments you made towards it to your next largest debt.
The avalanche method is the opposite. You pay off the largest debt first, then you pay the second largest. Doing this frees up more money initially, so you can quickly pay off smaller debts.
- Call your creditors to negotiate
If you’re having trouble paying your bills, you could call your creditors to negotiate. Ask to skip a payment, reduce fees, reduce your interest rate to minimize your payment or for other supports that may help you eliminate your debt. If you took out insurance on your credit card, you may also ask to use it to wipe out your debt in some circumstances.
- Ask to settle the debt
If you have a lump sum of money and your debt has gone to collections, you may want to offer a settlement. If you owe $1,000 but only have $600, ask if you can settle the account for $600. Sometimes, they’ll agree.
These are three options that may help you eliminate debt without bankruptcy. If you feel that you can’t get a handle on your debt and that these methods won’t work for you, you may want to learn more about Chapter 7 and 13 bankruptcy to see if one is right for you.