Thomas K. McKnight - Bankruptcy Alternatives in Tustin, California

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What Are The Alternatives to Bankruptcy

If you are considering declaring bankruptcy, explore each of your other choices first. Bankruptcy is a suitable option for some people, however 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 offer free debt counseling to individuals who wish 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 regular payments to the credit counseling company, and they make payments on your behalf to the creditors. In addition to the convenience that this choice 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 resource 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 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 money 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 talk to a tax professional 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 often charge high fees and give no guarantees.

Liquidating Assets

Do you have a vehicle that you could sell for some quick cash? How about stocks or bonds that have significant worth? Selling or liquidating an asset allows you to repay your debts quickly and easily. The hardest part of this alternative is breaking the emotional tie that you may have to your belongings. Nevertheless, your sadness may turn to joy when you realize how great it feels to be debt free!

Debt Consolidation Loan

Some people decide 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 repay unsecured creditors. Just beware that if you do not 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 adjustments often require making small sacrifices now to avoid big problems later on. For example, 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 expenses and making a budget. You might 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 anybody that 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. 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 seek legal guidance if you are questioning if you're judgment proof.

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For more information about chapter 7 and chapter 13 bankruptcy, or how to file your bankruptcy in Tustin CA, contact Thomas K McKnight LLP at (800) 466 - 7507 or visit our website at TKMLLP.com for a Free Consultation. 

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