Alternatives to Bankruptcy
If you are thinking about declaring bankruptcy, examine each of your other options first. Bankruptcy is a suitable solution for some people, however it needs to 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 companies that offer free debt counseling to people 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 firm, and they make payments on your behalf to the creditors. Along with 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 good resource for some people to help them save a considerable amount of money and get out of debt faster.
If your debt is severely overdue, debt settlement might be an alternative. Whereas in a debt management plan, you pay off your entire debt gradually, 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. Additionally, you 'd 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 could try your hand at talking directly with the creditors. Debt settlement firms often charge high fees and provide no guarantees.
Do you have a car that you could sell for some quick cash? How about stocks or bonds that have considerable worth? Selling or liquidating an asset allows you to pay off 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 sadness might turn to joy when you realize how great it feels to be debt free!
Debt Consolidation Loan
Some people choose to get rid of the inconvenience of paying several 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 could find yourself evicted since a home equity loan is secured by your house.
With any option you choose-- including bankruptcy-- you're going to need 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 changes typically require making small sacrifices now to prevent big problems later on. For example, selling your motorcycle might give you enough money to pay your mortgage and avoid foreclosure. Keeping a tighter rein on spending can also help you avoid bankruptcy. Begin by tracking your spending and developing a budget. You may find that you have more disposable income than you realized.
Some people with minimal assets and no financial means to pay their debts are considered to be "judgment proof." This means that anyone that 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 typically not thrown in jail for failing to pay debts, except in legal circumstances (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 should certainly seek legal counsel if you are questioning if you're judgment proof.
For More Information About Bankruptcy Alternatives in Fountain Valley, California, Contact Thomas K. McKnight LLP At (800) 466-7507 or Visit Our Website at TKMLLP.Com for a Free Consultation!