If you are struggling under the weight of your debt, bankruptcy is one option to help you find relief.
However, it’s not the only option. Before you decide to file for bankruptcy, make sure you have investigated all the alternatives available to you.
Negotiate with your creditors
If you at least have some disposable income or assets of some value that you’re willing to sell to satisfy your debts, you may get better results out of negotiating with your creditors rather than filing for bankruptcy. Negotiation can help you buy the time you need to restore your financial health without suffering the negative consequences of bankruptcy. In some cases, your creditors might even agree to settle your debts for less than the amount you owe.
You should conduct these creditor negotiations with the assistance of a bankruptcy attorney who has a thorough understanding of the types of concessions creditors could be willing to make.
Seek assistance from a credit counseling agency
If you are uncomfortable negotiating with creditors or collection firms, you might seek outside assistance from a credit counseling agency. These organizations, which are often nonprofits, work with you to establish a repayment plan for your debts and improve your overall financial picture.
You can easily find a list of these agencies in your area by visiting the United States Trustee website, and then find the “Credit Counseling and Debtor Education” page.
There are some advantages and disadvantages to choosing a debt counseling service over a Chapter 13 repayment plan. The obvious advantage is that no bankruptcy will appear on your credit record, which will make it significantly easier for you to get a loan in the future. However, Chapter 13 also offers you certain protections that standard debt counseling does not.
For example, Chapter 13 protects you from collection actions initiated by creditors if you miss a payment, while debt management programs do not. Debt management also usually requires you to pay off your debts in full, unlike a Chapter 13 bankruptcy, in which you would typically pay a portion of any unsecured debts.
There are also some who criticize debt counseling agencies for receiving funding from creditors, which means they could face conflicts of interest when advising their clients.
Take no action at all
Doing nothing can occasionally (and surprisingly) be the best course of action for people in debt. If you have a low income, little property and intend to live simply in the future, the court could consider you “judgment proof,” meaning anyone who sues you will not be able to collect, even with a court judgment. You simply do not have any assets they can legally claim, except in cases like failure to pay child support or taxes.
It’s important to note that relatively few people will attain a positive outcome by doing nothing. In most cases, negotiating with creditors, working with a credit counselor or filing for bankruptcy protection are all better options than ignoring the problem.
To learn more about the non-bankruptcy options available to you when you’re facing large amounts of debt, contact a knowledgeable Mcellan bankruptcy lawyer at Marcos D. Oliva, P.C.