Possible Alternatives to Bankruptcy
With more people being laid off, having wages cut, and hours lowered, families are finding they can no longer keep up with their current debt level. Because people fear the consequences of bankruptcy, they often consider debt management. This is where you hire a company to “manage your debt.” There are basically two options: 1) debt management – where you pay the debt management company and then the money is distributed to your creditors; 2) debt settlement – where you pay the debt settlement company and they attempt to settle with your creditors.
As with loan modification, be very careful about who you are dealing with. Check with the Better Business Bureau and the Texas Attorney General’s office and make sure that if you go with debt management or debt settlement, the company you are dealing with is reputable. Having a local office is a plus so that you can hold someone accountable. Also, be sure to understand how you will be charged and whether your specific creditors are companies that regularly work with them. Ask questions about how long it will take you to accumulate funds to complete the program they are recommending and how much the total cost will be. Ask about the impact on your credit score while you are participating in the program and what happens if one of your creditors refuses to work with the company. The Texas Attorney General offers a good comparison of the pros and cons of various options here.