Are There Alternatives to Bankruptcy That Will Help Improve My Credit?

 Posted on December 09, 2021 in Bankruptcy

Most American consumers have debt in some form, and those who experience financial difficulties may struggle to repay these debts. Failing to make payments on time can have a significant effect on a person’s credit score, and this may make it more difficult to obtain loans or other forms of credit in the future. A low credit score can also affect a person in other ways, including their ability to find employment or obtain housing. While those who are struggling with debts may be able to receive relief by filing for bankruptcy, this will have a further negative impact on their credit score. As they determine how to rebuild their credit, a person may consider some alternatives to bankruptcy, and by consulting with an experienced attorney, they can understand their best options for receiving debt relief and maintaining financial stability.

Addressing Debts and Rebuilding Credit

There are multiple approaches that a person can take toward their debts as they determine how to repay what is owed while ensuring that they can obtain loans or credit in the future. Some of these options include:

• Debt settlement - A debtor may be able to negotiate with creditors to pay off a certain percentage of what is owed while canceling the remaining debt. Since a person will usually need to pay a lump sum to a creditor, this option may only be available in cases where savings are available or where assets may be sold to raise the necessary funds. A debt settlement may decrease a person’s credit score, but this may be preferable to risking future decreases due to missed payments. 

• Debt consolidation - Rather than making payments on multiple different types of debts, it may be better to consolidate these debts into a single loan. Balance transfers may sometimes be available, or new debt consolidation loans may be used. However, these loans may require a person to put up their home or other property as collateral, and they could potentially lose these assets if they default on the loan in the future.

• Loan modifications - Creditors may be willing to negotiate with a debtor to find ways that they can continue making affordable payments. In some cases, a creditor may agree to reduce the interest rate or extend the term of a loan, resulting in lower ongoing payments. This will allow a person to continue paying off their debts, ensuring that they can avoid a negative impact on their credit score.

• Increasing income and decreasing expenses - In some cases, the best way to address debts is to make adjustments to a family’s budget to ensure that ongoing payments can be made. Cutting back on costs and making sacrifices may free up some money to put toward debts. A person may also begin working a second job or find other ways to earn income and ensure that they will be able to make all ongoing payments.

After making arrangements that will allow a person to pay their debts and avoid bankruptcy, they may be able to use a variety of strategies to increase their credit score. These may include paying all bills on time, avoiding taking out new loans, or becoming an authorized user on another person’s credit card. 

Contact Our San Antonio Debt Relief Attorney

If you are struggling with debts, the Law Offices of Chance M. McGhee can advise you of your options. We can help you pursue alternatives to bankruptcy when possible, including negotiating loan modifications or debt settlements. If bankruptcy will ultimately be the best option for you, we will work to ensure that you meet all of your legal requirements to receive relief from your debts. To arrange a free consultation, contact our Schertz bankruptcy lawyer at 210-342-3400.

Sources:

https://www.thebalance.com/five-ways-to-avoid-bankruptcy-960626

https://www.nerdwallet.com/article/finance/ways-to-rebuild-credit