Drowning in debt, and working harder and harder to make ends meet? You may think a bankruptcy filing is the only way out, but that is not necessarily the case. While filing for bankruptcy is one solution, it is a drastic step that should only be taken as a last resort.
This is especially true if you owe back taxes to the IRS or state. Depending on what type of taxes you owe, you might not be able to wipe out your back taxes in bankruptcy proceedings.
It’s important to weigh all your options and get a clear picture of your financial situation, so in this article, we are going to share with you 3 smart steps to take before declaring bankruptcy.
Depending on how much you owe, who your creditors are, and how the rest of your financial life looks, you may be able to dig yourself out of the hole and take back control without having to declare bankruptcy. Here are three smart alternatives to consider before calling a bankruptcy attorney.
3 Alternatives to Bankruptcy
- Contact a Tax Relief Firm
Most bankruptcy attorneys aren’t familiar with the complex tax laws so they won’t accurately be able to assess your tax situation.
A tax relief firm like New Freedom Tax Relief can help you assess your back tax situation and often help you settle your back tax debt with the IRS. If you owe a substantial amount of back taxes, this may be a good way to reduce your overall debt burden. This can also be a good first step to getting back on track with your finances.
- Request a Lower Interest Rate on Other Debts
If you are paying 18% or more in interest, it can be hard to keep up with the charges, let alone make any headway on the outstanding balance. Credit card interest rates are among the highest around, and those outrageous rates have trapped many consumers in a spiral of ever increasing debt.
How different would your finances look if your interest rate was cut in half? Would you finally be able to get ahead of the interest charges and start paying down your balance? If so, it is time to get your credit card issuer on the line.
Even if you do not think your credit card issuer will be receptive, it never hurts to ask. And when the credit card company finds out that you are thinking about filing bankruptcy, they may be more willing to negotiate than you think.
For tax debt, the IRS can sometimes remove penalties and interest from your tax debt, so it’s important to reach out to our firm to see what your options may be.
- Refinance Your Debt
Even if your credit card issuers and lenders are not willing to budge on the interest rates, you could still save money and avoid bankruptcy. Refinancing your existing debt through a home equity line of credit, a personal loan or other means could lower your interest rate substantially and slash your monthly payments.
If you do decide on this strategy, it pays to shop around. The more you can lower your interest rate, the more money you can save – and the faster you will be able to pay off your debts.
But it’s incredibly hard to refinance your debts if you have an IRS tax lien or wage levy. Our firm can get these released and help you get on financial track.
A bankruptcy filing can provide a fresh start for those in dire financial circumstances, helping them recover and rebuild their shattered monetary lives.
Even so, bankruptcy is not the only way out, and it is important for those considering this solution to research the alternatives first. The three bankruptcy alternatives listed above can also give you the fresh start you need, without the stigma or long-lasting impacts of a bankruptcy filing.
IMPORTANT: We highly recommend readers to reach out to our firm first. Our clients never have to talk to the IRS, and tax resolution through our firm can save you money and time in the long run. You might also be eligible for other relief programs or get your penalties and interest forgiven. Reach out to our firm today for a consultation here, or call us direct at 480-664-1249.