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Step 1
Work with a debt counseling company. Debt counselors can help you avoid filing bankruptcy by consolidating your debts into a lower monthly payment. Before you consider debt counseling, look at whether you can realistically pay off all of your debts given your income and cost of living. Also keep in mind that debt counseling can also lower your credit rating even further depending on how far behind you are on your payments.
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Step 2
Get a debt consolidation loan. Another way to avoid filing bankruptcy is to take out a loan against your home and pay off your credit card debt. While this might be a viable alternative to bankruptcy in some cases, if you can’t make the payments on your debt consolidation loan, you run the risk of losing your house. Before getting a debt consolidation loan as an alternative to bankruptcy, consider all factors such as the value of your house, how much money per month you can dedicate to paying down your debts, and what kind of interest you will be paying on perspective loans.
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Step 3
Settle with your creditors out of court. Oftentimes, consumer credit card companies are willing to let you pay off your debts at a fraction of the principal if you pay in one lump sum. Alternatively, if creditors and collection agencies are often willing to set up a monthly payment plan in exchange for keeping your case out of court. Unfortunately, many settlement payment plans are often twice that of a normal monthly minimum credit card payment. This is only advisable if you have extra income and your credit cards are already in collections.
