Alternatives to Bankruptcy
If you are thinking about declaring bankruptcy, explore all of your other options first. Bankruptcy is an appropriate option for some individuals, 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 legitimate firms that provide free debt counseling to individuals that want to get out of debt. If you have considerable credit card debt, you may 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 generally lowers credit card interest rates, waives late and over limit fees and stops collection activity. It can be a great resource for some people to help them save a lot of money and get out of debt quicker.
Debt Settlement
If your debt is significantly overdue, debt settlement might be an alternative. Whereas in a debt management plan, you pay off your entire debt over time, debt settlement involves creditors forgiving a part of your debt. The obvious advantage 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 'd want to speak with a tax expert because you would likely pay taxes on the forgiven amount as revenue. If you are interested in this alternative, you can try your hand at communicating directly with the creditors. Debt settlement companies typically charge high fees and give 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 worth? Selling or liquidating an asset allows you to repay your debts quickly and easily. The toughest part of this alternative is breaking the emotional connection that you might have to your belongings. However, your sorrow may turn to joy when you realize how good it feels to be debt free!
Debt Consolidation Loan
Some individuals choose to eliminate the inconvenience of paying several creditors by receiving 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 repay unsecured creditors. Just beware that if you don't pay your home equity loan, you can find yourself evicted because a home equity loan is secured by your house.
Lifestyle Adjustments
With any alternative you choose-- including bankruptcy-- you're going to have to make some lifestyle changes. Remember that saying, "If you keep doing what you've always done, you'll keep getting what you always got." Lifestyle changes typically require making small sacrifices now to avoid major problems later. For example, selling your motorcycle may give you enough cash to pay your mortgage and avoid foreclosure. Keeping a tighter rein on spending can also help you prevent bankruptcy. Start by tracking your expenses and creating a budget. You may discover that you have more disposable income than you realized.
Do Nothing
Some individuals with minimal assets and no financial means to pay their debts are considered to be "judgment proof." This means that anyone who sues you and acquires a court judgment won't 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 circumstances (e.g., neglecting 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 should definitely pursue legal guidance if you are questioning if you're judgment proof.
For More Information About Bankruptcy Alternatives in Orange, California, Contact Thomas K. McKnight LLP At (800) 466 - 7507 or Visit Our Website at TKMLLP.Com for a Free Consultation!
