Struggling with large amounts of debt can be overwhelming, and it is a reality that an increasing number of Americans are facing today. In fact, the New York Fed reports that total U.S. debts are steadily increasing, with mortgage balances rising by $162 billion in just the second quarter of 2019, and non-housing debts increasing by $37 billion, including:
- $20 billion in credit card balances
- $17 billion in auto loans
Student loan balances decreased by $8 billion in this quarter, but the total is much higher than both credit card and auto debts. While filing for bankruptcy may seem like the only option, there are some alternatives that you may be eligible for that could save your credit score and your ability to acquire loans in the future.
Negotiate with creditors
Considering Chapter 13 bankruptcy probably means that you have some income or assets you can sell. Many creditors are willing to negotiate terms favorable to your situation if it means you will continue to pay off your debts. The last thing a credit card company wants is for you to discharge all your debt, causing them to take a loss. They may reduce your interest rate or even reduce what you owe.
Seek assistance from a credit counseling agency
If you do not feel that negotiating with creditors is something you can do, states provide credit counseling and debt education through the U.S. Trustee Program. In most cases, you are now required to use these resources before you can file for bankruptcy.
The agency will help you set up a repayment plan that works for you, similar to a Chapter 13 plan. The benefit to this route is that your credit score is not affected, and you will not have a bankruptcy on your record. The downside is that you will pay everything off in full. If you miss one payment, that creditor can begin collection actions – something a bankruptcy would protect you from.