Options to Consider Before Filing for Bankruptcy (2024)

Filing for bankruptcy can be a difficult and confusing decision, especially if you don’t know what options are available to you. If you’re considering filing for bankruptcy, it’s important to get informed on your legal rights and the bankruptcy process.

Keep in mind that filing for bankruptcy can inflict severe damage to your personal credit history. Hence, if you’re planning to file for it, in the coming months, we suggest you consider the following options, first:

If you’re in a tough financial spot, filing for bankruptcy may seem like the only option. But before you make this important decision, it’s essential to understand what options are available to you. With that in mind, let’s take a closer look at some of the alternatives to consider before filing for bankruptcy.

Debt Counseling Options

First and foremost, explore debt counseling options. Many non-profit organizations offer free or low-cost counseling services that can help you develop effective strategies for repaying your debts. Additionally, if most of your debts are credit card debts, consider negotiating with your creditors directly. They may be willing to work out a more manageable payment plan with lower interest rates or reduced fees.

Another alternative is debt consolidation. This involves combining all of your outstanding debts into one loan with lower monthly payments and interest rates than what you were previously paying.

Signing up for debt consolidation can actually work to your advantage. Apart from helping you pay off your existing financial obligations, many of these programs have options to help you rebuild your credit score.

Sell valuable items you own to help pay off your debt.

One of the easiest ways to do so is by selling unused items around your home. Not only will it help you declutter, but it can also provide a quick infusion of cash that you can put toward paying down your debts.

Start by taking an inventory of items in your home that you no longer use or need. This could be anything from clothing and accessories to electronics and household appliances. Once you have a list, determine which items are in good condition and could potentially sell for a decent price.

Online marketplaces like eBay, Craigslist, and Facebook Marketplace are great places to post your listings and reach potential buyers.

In addition to online marketplaces, consider hosting a garage sale or participating in local flea markets or consignment shops.

Sell Real Estate

Do you own valuable assets, like an undeveloped parcel of land? If you do then, why not sell it? Selling some of your properties can turn out to be a better alternative to undergoing bankruptcy proceedings. After all, you could lose everything to bankruptcy. Moreover, you can receive better offers from interested parties for the assets you’re planning to sell. In fact, you may receive enough funds that you can use not only for paying off your debts, but also for starting over.

Look for additional income streams, which will let you earn additional cash you can eventually use for covering your monthly bills.

Keep in mind this can be just a temporary job that you keep until you are out of debt. Be wary of get rich quick schemes. Desperation often leads to taking chances you ordinarily wouldn’t take. When you look online there are a lot of companies advertising work at home solutions. Some are legit and some are as phony as a $3 bill! If you need to “buy supplies” from them in order to work for them. It’s most likely a scam!

Some people take this time to try to start a business. If you are already in debt you need to find something that has a very low cost to start. When I got out of college I started a drop shipping business to help me pay off credit card and student loan debt. It worked very well for me and I did that for several years as a side business. You just need to have access to companies that offer drop shipping and you can resell their products on your website, social site, or Ebay. I even put together a little catalog I would ship out from a leads page I had online. I made it at home using a binder that I paid $200 at the time for. It more than paid for itself!

Start a low cost homebased business

There are many low cost businesses that you can start from home. Doing a quick search on Pinterest will show you lots of people creating homebased business opportunities for themselves.

One such business that can help you and others is opening a consignment shop for your friends and neighbors. If you are good with words, you can offer to set up ads on craigslist, ebaby, amazon and the like and resell your friends and neighbors belongs.

You can make them pay all the fees up front and you manage taking the pictures of the items, posting (and re-posting) them, obtaining the payment and eventually shipping the item out to the winning bidder!

You can charge a 50% of the sale item price w/ all fees paid by either the owner of the property or the winner of the auction!

Only consider starting your own business if you are a disciplined person. Once I started making money in my business, everyone wanted me to show them how to do it. I wasted a lot of time showing family and friends how to start their own drop shipping business. So many of them came by for a weekend or two for us to work together but when they didn’t make money right away they quit. If you know that’s you (and their is no shame in that!) you are better off finding a job that you can work at after your main job and on weekends.

Be ready to negotiate

Don’t be embarrassed or too shy to ask for a lower interest rate, more flexible payments terms, or for a longer repayment period with your creditors. After all, most creditors would rather help you find a way for you to pay so that they can get their money back.

Filing bankruptcy means they won’t get anything back, so it’s a lose – lose situation since your credit will be adversely impacted. Also, remember to ALWAYS get things in writing. Don’t do any “handshake” or verbal deals .

Understand the provisions of the local, state or federal laws, most especially the stipulations directly involved with bankruptcy proceedings.

This way, you can understand the pros and cons of filing bankruptcy. You will know what the legal steps are; and you can realize whether or not filing for bankruptcy will suit your needs.