No one should take his or her decision to file for bankruptcy lightly. It’s a serious decision that should be given serious consideration. It will often seem like the best alternative for anyone who feels hopeless about their level of debt, but the repercussions of filing must be taken into consideration and weighed carefully against the pros. Filing for bankruptcy, while it will erase the majority of debts, will severely affect the filer’s credit score and make borrowing money very difficult. Before you decide to file for Chapter 7, 11, 12 or 13 bankruptcy, think about whether or not one of the top 3 bankruptcy alternatives might be a better solution for you.
Top 3 Alternatives to Bankruptcy:
- Judgment Proof
- Debt Settlement
- Debt Consolidation
The Judgment Proof is a basic alternative to filing, but it isn’t used very often. Massive debts combined with a very small income or no income at all makes an individual eligible. If creditors take you to court, there’s no money for them to take. When this is the case, creditors will often simply write the debt off as “bad” instead of proceeding by taking you to court. The debt is wiped from your record after the requisite 7 years. This only holds true so long as your status stays at little to no income. If your situation changes and there is income for the creditors to go after for repayment, they can do so.
Debt Settlement is an obvious and generally easy method of avoiding bankruptcy for consumers who are suffering mainly from overwhelming credit card debt. Settling your credit card debts will call a halt to collection calls, and angry letters from creditors who are considering taking legal action against you for repayment. To settle a debt you simply contact the creditor and negotiate a reduced balance that both of you can agree upon as a “settling” of the account. While this seems like an easy solution, most consumers are too intimidated by the process to attempt it. Debt Settlement also requires that you have access to lump sums of money in order to offer up front payment of a substantial portion of the total debt owed (usually 50-80%) in order to consider the account “settled.”
Debt Consolidation is another option that many consider. When consolidating debt, the consumer takes out one larger loan to cover all debt owed. It is recommended as a money-saving technique because the total interest paid on the single loan will be substantially lower than the combined interest on several smaller credit balances. Some will put up property against the loan for consolidation in an attempt to get a reduced rate. This may seem like a good idea, but first consider the potential consequences. In this scenario, you would be exchanging a series of unsecured loans for one secured loan with the risk of losing any property you put up to secure the funds.
When you are in financial straits it often seems as if there is no solution, but as you can see, you still have choices. Consider the pros and cons of bankruptcy and the bankruptcy alternatives discussed and pinpoint the path that is best for you. When considering bankruptcy, you are at one of life’s crossroads, take a moment to be clear about where you are headed and if it’s in the direction that suits you and your particular situation.
If you are ready to take care of your financial problems and wipe the slate clean, contact Westgate Law today. We can expertly and knowledgably guide you through the process.