Bankruptcy Alternatives Blog

Borrowing is a good bankruptcy alternative – here’s how to do it, even if you have bad credit

We all know that borrowing is a good bankruptcy alternative, but what if you don’t qualify for a loan? If you have less than perfect credit, and on your own you don’t qualify for a debt consolidation loan, consider “borrowing” someone else’s credit history.

No, we are NOT recommending identity theft, since that will land you in jail. However, a co-signer with good credit may be just what you need to qualify for a loan.

Ask your family members, such as your parents, or any other friend or relative with good credit to co-sign a loan for you. You can even ask them to give you a supplementary card on their account. By having a joint account with them, your credit report will reflect the credit history of that card with that borrower, and can help you to establish a good credit history.

But beware: if you have a joint debt with someone, and you don’t make your share of the payments, that person becomes fully liable for the entire debt. This is a very serious problem, so only ask someone to help you if you are sure that you can make all required payments.

Filed under debt consolidation, bankruptcy alternative

Is Credit Counseling a Good Bankruptcy Alternative?

Consumer credit counseling is the process where a credit counselor meets with you and works out a plan between you and your creditors to repay your debts. This may involve simply teaching you some budgeting skills to help you deal with the debts on your own, or it may involve a formal Debt Management Program where you pay the credit counselor each month, and they distribute the money to your creditors.

If you can afford it, credit counseling is a good bankruptcy alternative. If you have $10,000 in debts and you can afford to repay $500 per month, under your debt management plan you will repay all of your debts in 20 months. Often the interest rate on your debts is reduced or eliminated, so it’s a great way to ensure that all of your payments are going towards the principal of your loan.

But here’s the catch: in our example above you are paying $500 per month. If you are unemployed, or don’t have sufficient income to make the payments, credit counseling is not the correct option for you.

As with all debt management strategies, there are positives and negatives, so meet with a credit counselor to review your options, work out a budget, and decide if credit counseling is the correct strategy for you.

Tagged as credit counseling, consumer credit counseling, debt management program, bankruptcy alternative