Thomas K. McKnight - Bankruptcy Alternatives in Orange County, California
Alternatives to Bankruptcy
If you are considering declaring bankruptcy, look into each of your other choices first. Bankruptcy is a suitable solution for some people, but it should be your last resort. Let's go through some bankruptcy alternatives so you leave no stone unturned.
Credit/Debt Counseling & Debt Management Plans
There are some reputable companies that offer free debt counseling to individuals that want to get out of debt. If you have serious 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. Along with the convenience that this choice provides, a debt management plan generally reduces credit card interest rates, waives late and over limit fees and stops collection activity. It can be a great tool for some individuals to help them save a lot of money and get out of debt faster.
Debt Settlement
If your debt is significantly overdue, debt settlement may be an alternative. Whereas in a debt management plan, you pay off your entire debt gradually, debt settlement involves creditors forgiving a portion of your debt. The obvious benefit to this would be the cash savings. The drawback 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 consult a tax expert because you would likely pay taxes on the forgiven amount as revenue. If you are interested in this option, you might try your hand at talking directly with the creditors. Debt settlement companies typically charge high fees and give no guarantees.
Liquidating Assets
Do you have a car 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 choice is breaking the emotional connection that you may have to your possessions. Nevertheless, your sorrow might turn to joy when you realize how great it feels to be debt free!
Debt Consolidation Loan
Some individuals choose to eliminate the inconvenience of paying multiple creditors by acquiring a debt consolidation loan that covers all of their debts. If you have equity in your home, you could take out a home equity loan to pay off unsecured creditors. Just beware that if you do not pay your home equity loan, you can 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 changes. Remember that saying, "If you keep doing what youhave always done, you'll keep getting what you always got." Lifestyle adjustments typically require making small sacrifices now to prevent big problems later on. For instance, selling your motorcycle may provide you enough money to pay your mortgage and prevent foreclosure. Maintaining a tighter rein on spending can also help you prevent bankruptcy. Begin by tracking your expenses and developing a budget. You may discover that you have more disposable income than you realized.
Do Nothing
Some people 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 acquires a court judgment won't have the ability to collect from you simply because you have no assets that they can legally take. An individual 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, regular household furnishings, personal effects, food, Social Security, unemployment, or public assistance benefits. You need to certainly pursue legal guidance if you are wondering if you're judgment proof.
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