There are several possible alternatives to bankruptcy for those in financial trouble. It is important that when debtors consider these options they investigate the organizations they are dealing with and make sure they do not do anything that places them in a worse situation. Some bankruptcy alternatives might have an impact on a subsequent bankruptcy filing.

The main alternatives are out-of-court settlement with creditors, debt counseling services, and debt consolidation loans.

Out-of-Court Settlement
Rather than file bankruptcy, one may consider settling your unsecured debt at a reduced amount. It is unlikely that an individual could do this independently but there are companies that will help you negotiate with your creditors. Is is important that these negotiations are handled properly and the consumer should seek professional help. As in all these actions there can be a negative effect on one's credit rating.

Debt Counseling Service
Debt counseling services can be a good start in helping you deal with your financial difficulty. They can consolidate your monthly payments and obtain payment or interest reductions on your unsecured debts. The only problem with debt counseling is that many people are in such financial trouble that they will not qualify for debt counseling because they will not be able to repay their debt even under the better terms. And again this option could have a signifcant negative impact on your credit rating.

Debt Consolidation Loans
Another option is borrowing against the equity in one's home to pay down credit card debt. This of course requires home equity and a careful consideration to make sure you are not putting yourself in a worse position. Not being able to pay your home equity loan could put your home in danger leave you in a worse position than not being able to pay your credit card debts.