Is Bankruptcy Right for You?

Some experts recommend that if you cannot pay back outstanding consumer debt in three to five years, bankruptcy may be the best option for you. (Of course, that doesn’t include long-term loans like mortgages, which are normally repaid in 15-30 years.) But bankruptcy isn’t an “easy” out. In fact, depending on which kind you file, it can make it difficult for you to obtain new credit for up to 10 years.

Bankruptcy Alternatives

Before you decide whether or not bankruptcy is right for you, consider all your options. You might discover other alternatives to bankruptcy that can help you achieve debt relief. Consider talking with a credit counselor about your situation. Keep in mind that not all credit counseling agencies are created equal. Most credit counseling agencies are funded by credit card issuers and other lenders. These types of credit counseling agencies are more inclined to steer you away from bankruptcy, even if it may really be the best option for you.

If you are considering credit counseling, the National Foundation for Consumer Credit (NFCC) offers free or low-cost debt counseling, financial education, budgeting assistance, and other financial services for consumers. To locate an office nearby, you can check the NFCC web site at www.nfcc.org or call toll-free 1-800-388-2227 for 24-hour automated office listings.

The NFCC also offers Debt Management Plans that can sometimes lower your payments, fines, or interest. A Debt Management Plan offers a systematic way to pay down outstanding debt. The NFCC can often negotiate reduced or waived finance charges and fewer collection calls, helping you bring your debt under control more quickly. With a Debt Management Plan, you would deposit your debt repayment funds with the agency each month and the NFCC would disperse the funds to your creditors according to pre-negotiated repayment plans.