Debt Relief Options

Find cash wherever you may have it.  Consider selling unwanted or unneeded assets, working more hours or a second job, conduct a budget analysis, factoring in all incoming and outgoing payments and communicate with your creditors.  If all that isn't enough, then consider debt settlement and your other options carefully.

In addition to bankruptcy there may be several options available to you to consolidate your debt and ultimately offer you debt relief.  If you are fortunate enough to have equity you can use that to take out cash to pay other higher interest bills.  These options do include refinancing, a second mortgage and even refinancing your car. Consdier your options carefully as you don't want to make your bad situation worse.

Your options include:

Getting a personal loan
If your credit is good enough to qualify for a personal loan that my be an option.  If your credit cards are costing you 20% or more a personal loan may cost 1/2 of that. 

Refinancing your car
Your car may be an asset if it is worth more than the loan balance or is owned free and clear.  You can take out a loan secured by your automobile.  Rates quoted are usually much lower than credit card rates.

Taking out a Home Equity Loan Besides being offered at much lower rates than credit cards, you gain the advantage of a tax deduction.  You can choose a fixed rate loan or seek a home equity line of credit.

Refinance existing home to take out cash
You can refinance a current mortgage at a higher dollar amount taking out the cash from your equity stake.  Your equity is computed by comparing the appraisal value of your home to the amount already mortgaged.  This gives you a further tax deduction also.   Please think the consequences through as you will be eating up your equity and assuming your refinanced mortgage for a much longer period of years.

Borrowing or cashing in retirement assets
Most financial planners will tell you this is the worst option.   It can be near impossible to make up those funds leaving you without funds when you most need them and are unable to earn them.   If you are considering this option please seek the counsel of a tax advisor as you can incur current tax liability further reducing the amount of funds you net from this strategy.

Consumer Credit Counseling
Sounds good in theory, in practice there are some downsides that are not mentioned in their numerous TV ads.. Typically a counselor will assess your financial situation, assist in creating a spending plan, and negotiate the terms of your debts with creditors. They will negotiate terms such as lower interest rates and waived late fees  They state their advantage is that you can reduce your monthly payments and consolidate your bills into one.   Debt consolidation is typically not a great option.  In a consolidation people end up repaying 100% of their outstanding debt, interest on the debt, and the consolidation companies’ fee. What they rarely tell you is that by  doing this can ruin your credit rating.  All accounts involved are marked consumer credit counseling by the creditors and that is considered a huge red flag by other potential creditors limiting your ability to obtain new credit..   Also even when  the creditors agree to accept a lower payment, lower than the minimum payment, they will report you a paying late and this will continue for a period of months until the debt is paid.

Although CCC states they are non-profit most of the counseling services' fees are paid by the lenders themselves, which send back to the services a portion of the payments received. This has led some critics to charge that credit counseling is just a tool of the lending industry. The payment system, known as "fair share," has certainly encouraged the growth of credit counseling services. And some agencies, driven by competition, are now openly courting consumers who haven't fallen behind on their debts by promising lower interest rates. This development has angered credit-card companies and often hurts consumers, who may find out too late that such plans can hurt their credit ratings and are often unnecessary.
There are limits to how low they can get your payment and if you can't pay off the debt in 3 or 4 years you probably are not a good candidate.

Bankruptcy
Bankruptcy represents both the most devastating debt solution for the debtor's credit while providing the most complete elimination of the debt.  Consult an attorney to learn your state's provisions and to consult on your individual situation.  A chapter 7 personal bankruptcy can wipe out all of a person's debts, allow them to keep all of their possessions and get a fresh start again. In Chapter 7 all nonexempt assets are turned over to the bankruptcy trustee and debts discharged. Exemptions vary by state.The bad news is that a chapter 7 remains on your credit reports for ten years. Bankruptcy ranks as the worst thing possible on your credit report, but once it's over you may start to rebuild credit immediately Exactly who can qualify to have their debts discharged in a "no asset" case where they retain everything varies by state.  In general the best candidates for a Chapter 7 is someone with no property, few enough assets that they may all be exempted, large consumer debt from national creditors, low enough income that they will not be forced into a Chapter 13 and no non-dischargeable tax, student loans or court obligations.

In chapter 13 bankruptcy cases debtors reorganize their finances by paying a portion of what they owe as settlement in full of their debts. That means you will have to satisfy some of the unsecured loans and other debts before they will be discharged. In Chapter 13 a plan outlines how the debtor will pay creditors over a three to five year period. Chapter 13 mainly comes into play as a means to save a home from foreclosure.  Certain debt cannot be included in Chapter 13 Bankruptcy including child support, alimony, educational loans, criminal fines and restitution ordered by the courts. The court usually appoints  a trustee to receive your payments and divide them between your creditors. As long as your payments are on time you are protected from creditors making any attempt at collection against you. If you don't make your payments a judge can dismiss your case.

Bankruptcy can make it difficult to rent an apartment, buy a house or a condo, get some types of insurance, get additional credit, and, sometimes, get a job. Besides it being reported on your credit the public records in the court system are kept for twenty years.  The lingering affect of being charged higher interest rates by creditors can be  much longer than expected.