Thomas K. McKnight - Bankruptcy Alternatives in Santa Ana
Alternatives to Bankruptcy
If you are thinking about declaring bankruptcy, look into all of your other choices first. Bankruptcy is a suitable option 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 legitimate firms that provide free debt counseling to people that wish 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 firm, and they make payments on your behalf to the creditors. In addition to the convenience that this option offers, a debt management plan generally reduces credit card interest rates, waives late and over limit fees and also stops collection activity. It can be a good tool for some people to help them save a lot of money and get out of debt quicker.
If your debt is significantly overdue, 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 part of your debt. The obvious advantage 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. In addition, you would want to talk to 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 firms usually charge high fees and provide no guarantees.
Do you have a vehicle that you could sell for some quick cash? How about stocks or bonds that have significant value? Selling or liquidating an asset allows you to repay your debts quickly and easily. The hardest part of this choice is breaking the emotional connection that you may have to your possessions. However, your sorrow may turn to joy when you realize how great it feels to be debt free!
Debt Consolidation Loan
Some individuals decide to eliminate 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 repay unsecured creditors. Just beware that if you don't pay your home equity loan, you could find yourself evicted because a home equity loan is secured by your house.
With any alternative you choose-- including bankruptcy-- you're going to have to make some lifestyle adjustments. Remember that saying, "If you keep doing what youhave always done, you'll keep getting what you always got." Lifestyle changes typically require making small sacrifices now to prevent major problems later on. For instance, selling your motorcycle may 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 spendings and developing a budget. You might find that you have more disposable income than you realized.
Some people with limited assets and no financial means to pay their debts are considered to be "judgment proof." This means that anybody who sues you and obtains a court judgment won't be able 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., failing 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.