You’re a pilot whose plane is in trouble. You have but a few minutes to decide what to do before it goes down. Do you strap on a parachute and bail out right away, or do you try to find a way to save the plane and land it as intact as possible?
When it comes to significant financial problems, a lot of people reach for the parachute that is bankruptcy protection and hope for the best. This does work, but the plane (their credit history) is a total loss afterwards.
Let’s explore some workable alternatives to bankruptcy to find you a way to land with the craft as intact as possible.
To extend the metaphor: If many systems are failing simultaneously, but the plane itself is still relatively undamaged, focus your attention on the ones you need to get to the ground safely.
In other words, if your credit score is still pretty good, rather than trying to spread your payments over many different debts, get a loan and combine them all into one that might be easier to manage and service. This could lower your monthly payments, reduce the interest rates you’re paying and give you one problem to address rather than several.
It’s also the least damaging solution here to your credit history.
Credit Counseling/Debt Management
Get on the radio and call the tower for some expert assistance. Maybe somebody on the ground, who has seen that situation before, can guide you through the problem. They can let you know what your best options are once they’ve assessed the circumstances. Sometimes it might just be a matter of operating the controls differently to get the plane back under control.
A credit counselor will review your financial strategy to look for budgeting opportunities you might have missed and help you restructure your expenditures to clean things up and avoid a repeat of the problem. If that won’t work, they can also take control on your behalf under a debt management program. In this situation, they’ll try to negotiate reduced interest payments and fee waivers with your creditors, then pay your bills each month — with funds you provide — to get things back under control.
If things are too far beyond your skill set, but there’s still a chance for the plane, perhaps you can bring a more experienced pilot into the cockpit. A fresh set of eyes might have a better idea of what can be sacrificed so you can still pull a decent landing out of the situation.
In a similar fashion, contracting a debt relief firm puts an agent who knows how to get out of debt between you and your financial troubles. This person can potentially negotiate with your creditors to settle your accounts for less than is currently owed in exchange for timely payment.
The idea is that your creditors would rather at least get something out of the plane than watch it explode on impact and get nothing at all. A debt settlement agency works out such agreements with your creditors, takes over payments of your bills and settles them one at a time with money you funnel into a special account for this purpose.
It’s Usually Better to Save the Plane
Each of these three strategies presents an opportunity to at least save some of the plane, as opposed to losing the entire thing. Yes, you’ll land a bit roughly with the last two, but at least you’ll still have the basic airframe to which you can apply new engines, better instrumentation, overhauled control surfaces and a new coat of paint.
Simply said, implementing one of these workable alternatives to bankruptcy will hopefully make it easier to start rebuilding your creditworthy status in the months (or years) following the incident.