It’s no secret many people have found themselves over extended and are feeling the painful impacts during this recession today.   An often discussed alternative to financial struggles is filing bankruptcy.  I hear people pondering this approach quite often in financial counseling.

I’ll disclaim now that I’m not a legal expert or lawyer, so I don’t plan to attempt to explain the legalities around bankruptcy or dive into the differnent types.  Instead, I’ll offer a few links to some online videos I found on the US Courts Bankruptcy website.  They seem to be pretty good overviews of bankruptcy and the processes that surround it.

• Introduction to Bankruptcy
• Types of Bankruptcy

Biblical perspective on paying what we borrow

Beyond the emotional scars and long term impacts of going through this process, the Bible states we are to repay whatever we borrow regardless of how long it takes.

The wicked borrows and does not pay back, but the righteous is gracious and gives (Psalm 37:21).
It is better that you should not vow than that you should vow and not pay (Ecclesiastes 5:5).

Options to avoid bankruptcy

There are a number of options that can be taken to avoid bankruptcy that may often not be thoughtfully considered.

Negotiation

I’ve always learned in training and discussions with other counselors to counsel people to not run away from creditors.  In today’s financial climate creditors may be willing to negotiate out of court settlements for debt or reduction in payments.  This is a topic often discussed on the Dave Ramsey show in which Dave sometimes recommends getting an agreement in writing for a pay off amount.

Credit counseling

With a reputable credit counseling organization such as Consumer Credit Counseling Service, debt payments can become more affordable.  Although, there are certain fees associated with services and potentially longer terms.  It can be a good option if one can follow the plan and avoid future debts.  Obviously, the key is to avoid the future debts which requires solving the reasons for the debt in the first place.

Sell assets

Although, it’s sometimes difficult to let go of assets such as a home, this can be viable option if the home isn’t upside down.  Short selling can also be an option which leaves one with debt, but a lower amount.

Financial Counseling

A financial counselor, such as a Money Map Coach can help with setting up a budget and reviewing spending decisions that may be impacting the ability to make payments.

Final thoughts

These are just a few options in which I hope someone may consider pursuing versus bankruptcy.  Some may still choose to file bankruptcy as the only remaining option.  If this occurs, the person should make the commitment (even if long-term) to repay what was borrowed.

Can you think of other options to avoid bankruptcy?

Related Posts:

• How to Select a Legitimate Credit Counseling Agency
• Should You Work with a Debt Settlement Company?
• Basics of Bankruptcy
• Credit Counseling: An Option to Consider?
• Live Debt Free – Avoid the Stress of Debt