Alternatives to Bankruptcy
If you are considering declaring bankruptcy, explore each of your other alternatives first. Bankruptcy is an appropriate solution for some individuals, however 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 reputable firms that provide free debt counseling to individuals who want to get out of debt. If you have considerable credit card debt, you might 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 reduces credit card interest rates, waives late and over limit fees and stops collection activity. It can be a good tool for some people to help them save a considerable amount of money and get out of debt quicker.
If your debt is significantly delinquent, 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 benefit to this would be the money savings. The downside 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 expert 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 communicating directly with the creditors. Debt settlement firms often charge high fees and give no guarantees.
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 helps you to repay your debts quickly and easily. The toughest part of this choice is breaking the emotional tie that you may have to your belongings. 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 get rid of 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 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 since 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 you've 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 might give you enough money to pay your mortgage and prevent foreclosure. Maintaining a tighter rein on spending can also help you avoid bankruptcy. Start by tracking your spendings and making a budget. You might discover that you have more disposable income than you realized.
Some people with minimal assets and no financial means to pay their debts are deemed to be "judgment proof." This means that anyone who sues you and obtains a court judgment will not be able to collect from you simply because you have no assets that they can legally take. A person is generally 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, 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 Westminster, California, contact Thomas K. McKnight LLP at (800) 466-7507 or visit our website at TKMLLP.Com for a free consultation!