There is just no easy way to get out of debt, you have to face up to the
consequences. A bankruptcy is not always the answer, as the effects are
long lasting. There are four ways to handle debts that are out of control,
listed in best to worst in regards to the effect it will have on your
credit:
- If your credit isn't in
terrible shape, can you reduce your other expenses, even if it means
making hard choices or just change your lifestyle to fit your income?
Some ways to do this:
- Selling the second car
- Pulling equity out of your
home
- Applying for a non-secured
signature loan
- Loan from a relative
- Selling your home and
paying off your debts with the proceeds and then renting
- Cashing out your
401K/retirement benefits
- Selling family
heirlooms/jewelry/guns
- If your credit is already
gone or one of the above isn't an option, go through Consumer Credit
Counseling Services (CCCS). Check your yellow pages for the local
number. In this way you're paying off your debts as if you were in a
Chapter 13 BK, but you don't file a BK.
- If CCCS won't take you, you
may want to consider bankruptcy. Doing a Chapter 13 takes longer, but
your credit is in a little better standing than if you do a Chapter 7.
In the Ch 13 they give you up to 5 years to pay off your debts. The
disadvantage is that you're in BK for up to 5 years plus your credit
report shows your BK for 7 more years after you have finished paying off
your debts.
- If you are so far in debt
that you can never repay it, then the best solution may be a Chapter 7
BK. A Chapter 7 is the least desirable credit-wise, but you are
typically out of BK in 6 months and you don't have to repay any debt.
The disadvantage is that this shows on your credit report for 10 years
from the date of filing your BK, and creditors are starting to tighten
their credit requirements, and you may have a tough time getting future
financing.
There is no magic solution.
Don't believe anyone who tells you otherwise.
