Thomas K. McKnight - Bankruptcy Alternatives in Irvine, CA
Alternatives to Bankruptcy
If you are thinking about declaring bankruptcy, look into each of your other alternatives first. Bankruptcy is an appropriate option for some individuals, 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 people who wish to get out of debt. If you have major credit card debt, you may be a candidate for a debt management plan. With a debt management plan, you make regular payments to the credit counseling firm, 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 stops collection activity. It can be a great resource for some individuals to help them save a considerable amount of money and get out of debt quicker.
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 money savings. The disadvantage 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 '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 option, you can try your hand at communicating directly with the creditors. Debt settlement firms typically 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 significant value? Selling or liquidating an asset helps you to repay your debts quickly and easily. The toughest part of this option is breaking the emotional connection that you may have to your belongings. However, your sadness might turn to joy when you realize how great it feels to be debt free!
Debt Consolidation Loan
Some individuals opt to get rid of the hassle of paying several creditors by acquiring 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 pay off 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 option 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 typically require making small sacrifices now to avoid big problems later on. For example, selling your motorcycle might give you enough cash to pay your mortgage and prevent foreclosure. Keeping a tighter rein on spending can also help you avoid bankruptcy. Start by tracking your spendings and making 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 deemed to be "judgment proof." This means that anyone who sues you and obtains 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 generally not thrown in jail for failing to pay debts, except in legal situations (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 seek legal guidance if you are questioning if you're judgment proof.
For more information about chapter 7 and chapter 13 bankruptcy, or how to file your bankruptcy in Irvine CA, contact Thomas K McKnight LLP at (800) 466 - 7507 or visit our website at TKMLLP.com for a Free Consultation.