There are plenty of alternatives to bankruptcy out there that you should consider before you decide to file. Some will allow you to begin to repair you credit score, some will not. Before you decide to file, you really should at least consider the alternatives to bankruptcy. You never know what will work for you until you study and learn about your other options. Let's take a look at the alternatives to bankruptcy, so you can decide if you should file.

Credit Counseling:

While some consider this nearly as bad as bankruptcy, it is a legitimate alternative. Before you decide to file, you should look at the pros and cons of consumer credit counseling. Essentially, the credit counseling service will work with your creditors for you, generally reducing interest rates and late fees. You pay the credit counseling service, they pay the creditors.

The main benefits to this are the reduction of interest rates, convenience of only making out one check, and a reduction in the total amount paid per month. In addition, you will no longer receive phone calls from collection agencies, making many breathe easier each time the phone rings. This makes credit counseling an attractive alternative to bankruptcy for many people to consider when they decide, should I file chapter 11 or 13.

On the flip side, credit counseling, when used as one of the alternatives to bankruptcy, will do further damage to your credit score. This may not matter much if your score is already in the 500's, but it should be taken into account. You will have a harder time getting loans in the immediate future. In addition, you will pay fees. Even nonprofit credit counseling companies charge fees for the services they provide. Before signing an paperwork you should carefully read the contracts to find out about consequences of not making the payments to the credit counseling services.


Some borrowers find negotiation one of the more attractive alternatives to bankruptcy. By calling creditors, like the credit card companies, and negotiating a reduction in interest or late fees, you may be able to save enough money to pull out of the hole. You can negotiate larger payments or a lump sum payment at a reduced amount. It's one of the legitimate alternatives to bankruptcy that should be considered carefully.

Negotiation has a down side as one of the alternatives to bankruptcy. Entering negotiations will have legal ramifications. Essentially, it gives the creditor something to use against you in court, should you be sued for your debt. You will likely not be able to claim that you shouldn't owe any money if you've already tried to negotiate a decrease. Consider the ramifications of this carefully when considering it as one of the alternatives to bankruptcy. You will likely be dealing with debt collectors that know what they are doing.

Debt Consolidation Loans:

Debt consolidation loans are one of the better alternatives to bankruptcy for those that can qualify. You can roll up all of your monthly bills into one lump sum payment each month, generally with lower interest and total payment amounts. Those with assets, like a home, are more likely to have luck with using this method as one of the alternatives to bankruptcy. This method is generally best when used before financial problems go out of control.

The real problem, however, with using debt consolidation loans as one of the alternatives to bankruptcy is the likelihood of being denied. Generally speaking, those that are considering filing will not have a credit score high enough to qualify. To make matter worse, applying for the loan and being denied will decrease your credit score further. For some, this is not one of the best alternatives to bankruptcy because it's just not feasible. In addition, for many, the thought of another loan is just to scary to take. There are some loans for people with bad credit to consider.

Credit Card Balance Transfers and Settlements:

Those that are having major problems due to credit card debt can use transfers as alternatives to bankruptcy. Transferring your debt to the card with the lowest rates will make a big difference in the total amount you have to pay each month. Those that select these methods as alternatives to bankruptcy will likely pay off their credit card debt quicker, and have more money available each month from the decreased minimum payment totals.

Those considering filing may not find this one of the suitable alternatives to bankruptcy. If your accounts aren't current you typically cannot transfer funds from one card to another. In addition, this is only an option for those whose money woes are all based primarily on credit card debt. This alternative to bankruptcy may or may not work for you, depending on your situation. If you are having financial problems that go beyond credit card debt, you may need to use another method, like negotiating a credit card debt settlement on your own.

Do Nothing:

Believe it or not, this has become one of the more common alternatives to bankruptcy. Debts, in some cases, can be discharged if there is no account activity or promise to pay after a certain number of years. While these alternatives to bankruptcy aren't generally considered to be wise, many people go ahead and do it all the way to home foreclosure. It's actually become relatively popular to allow the bank to simply foreclose, giving you some time to "squat" without making any payments.

Doing nothing as an alternative to bankruptcy won't solve any of the problems you are having. Generally speaking, you debts will follow you for years to come, so not doing anything about it means there's no fresh start. While popular, it's really not one of the best alternatives to bankruptcy. If you have equity in a home, this is not a good option as you'll likely lose the equity you worked so hard to build over the years. Use extreme caution if you decide to use this method.


There really are several alternatives to bankruptcy available for the consumer to consider before filing. Some will work, some will not. It really all boils down to the individual's needs. There is no best method. For many, a combination of the methods will work. Be sure you arm yourself with as much knowledge as possible when you consider the alternatives to bankruptcy. The decisions you make now will follow you for a long time to come.