Alternatives to Bankruptcy
If you are thinking about declaring bankruptcy, look into each of your other alternatives first. Bankruptcy is a suitable option for some people, but it should be your last resort. Let's walk through some bankruptcy alternatives so you leave no stone unturned.
Credit/Debt Counseling & Debt Management Plans
There are some reputable firms that offer free debt counseling to people who want to get out of debt. If you have significant credit card debt, you might be a candidate for a debt management plan. With a debt management plan, you make routine payments to the credit counseling company, and they make payments on your behalf to the creditors. In addition to the convenience that this option offers, a debt management plan typically lowers credit card interest rates, waives late and over limit fees and stops collection activity. It can be a great tool for some people to help them save a lot of money and get out of debt faster.
Debt Settlement
If your debt is significantly delinquent, debt settlement might be an option. Whereas in a debt management plan, you pay off your entire debt over time, debt settlement involves creditors forgiving a portion of your debt. The obvious benefit to this would be the cash savings. The disadvantage would be the fact that your credit report will show that the debt was paid for less than the agreed amount, which would likely lower your credit score. Furthermore, you would want to speak with a tax professional because you would likely pay taxes on the forgiven amount as revenue. If you are interested in this alternative, you might try your hand at communicating directly with the creditors. Debt settlement firms typically charge high fees and provide no guarantees.
Liquidating Assets
Do you have a vehicle that you could sell for some fast cash? How about stocks or bonds that have considerable value? Selling or liquidating an asset allows you to repay your debts quickly and easily. The toughest part of this option is breaking the emotional connection that you may have to your possessions. However, your sorrow might turn to joy when you realize how great it feels to be debt free!
Debt Consolidation Loan
Some people opt to get rid of the hassle of paying several creditors by getting a debt consolidation loan that covers all of their debts. If you have equity in your home, you can take out a home equity loan to pay off unsecured creditors. Just beware that if you do not pay your home equity loan, you could find yourself evicted since a home equity loan is secured by your house.
Lifestyle Changes
With any option you choose-- including bankruptcy-- you're going to have to make some lifestyle adjustments. Remember that saying, "If you keep doing what you've always done, you'll keep getting what you always got." Lifestyle adjustments usually require making small sacrifices now to avoid major problems later. For example, selling your motorcycle might provide you enough cash to pay your mortgage and avoid foreclosure. Keeping a tighter rein on spending can also help you prevent bankruptcy. Begin by tracking your expenses and making a budget. You may discover that you have more disposable income than you realized.
Do Nothing
Some individuals with limited assets and no financial means to pay their debts are considered to be "judgment proof." This means that anyone who sues you and gets a court judgment will not be able to collect from you simply because you have no assets that they can legally take. A person is usually not thrown in jail for failing to pay debts, other than in legal situations (e.g., failing to pay child support). Nor can a creditor take away essentials, such as basic clothing, ordinary household furnishings, personal effects, food, Social Security, unemployment, or public assistance benefits. You need to certainly seek legal guidance if you are wondering if you're judgment proof.
For More Information About Bankruptcy Alternatives in Los Angeles, California, Contact Thomas K. McKnight LLP At (800) 466 - 7507 or Visit Our Website at TKMLLP.Com for a Free Consultation!
