Alternatives to Filing Bankruptcy

Let Us Find out What Works Best for You

Although bankruptcy is often a solution to a debt problem, it is not necessarily the best solution for you. It is almost always available, but it may not always be needed.

Bob King at Florida Consumer Justice has helped hundreds of people who were in need. His free consultation allows you to start with the best legal advice, to help guide you to your best choice. He wants you to make the most informed and educated decision on debt relief and feel confident in that decision, whether it is bankruptcy or an alternative to bankruptcy.
Let Bob King assist you. Give him a call us today (941) 706-0632, or contact him online.

What Are the Alternatives to Bankruptcy?

Credit Counseling/Debt Management Programs

If your key focus is to negotiate with your creditors, you may contact a credit counseling service. To obtain better terms on your credit card debt, a credit counselor attempts negotiation in your best interests. Unsecured creditors (credit card companies, medical providers, signature loans, etc.) occasionally agree to the renegotiated terms. Renegotiated terms can also include possible reduction in total monthly payments, interest rates, late fees, finance charges, over-limit charges, and/or payment time frame.

However, you are usually obligated to pay the full amount of the principal balance. Local credit counseling agencies will be most familiar with your state’s laws and available debt relief pursuant to those laws. If a creditor refuses to work with credit counseling services, then you may want to consider bankruptcy options. In addition, if the credit card company decides to sue instead of negotiation, credit counseling will not protect you from a lawsuit like a bankruptcy will. If you or have a negotiator contact your creditors, you may be able to create a feasible repayment plan.

Debt Negotiation and Settlement

Debt negotiation and settlement can help you to recover financial stability, if your creditors agree to settle with terms that decrease your amount of debt. This, however, is often not the case. A negotiator usually asks the creditor for a specific settlement offer. Generally, the creditor will expect to be paid a sum in the amount of at least a third, but usually half, of the total debt owed, if the offer is favorable. If you have a third party negotiating the terms for you, they will also expect a payment. If you contact your creditors directly to negotiate or settle, you may be able to create a feasible repayment plan without a third party.

The option for debt negotiation and settlement with creditors is best for those who have disposable income, disposable savings, and assets that you’re able to sell, only a handful of creditors, and a chapter 7 or 13 has been ruled out as a better option. Please note there are several drawbacks to debt settlement. First, most creditors expect to be paid lump sum in cash from a bank account, or by certified funds (cashier’s check or money order), upon making a settlement offer.

Only sometimes will a creditor allow payments over 2-6 months. Second, debt negotiation and settlement can aid lawsuits against you if a settlement is unable to be reached within a certain time frame. Third, the creditor has the option and usually chooses to send you a form 1099-C and the end of the year for the amount of debt that was cancelled. For example, if you had a $2000 credit card and you settle at 50%, you can be issued a 1099C for $1000. You are required to take this amount on your taxes as income and pay income taxes, unless these amounts were discharged in bankruptcy.

Debt Consolidation

Debt consolidation is usually incurring new debt, a new loan, to pay off other loans. In many cases, debt consolidation converts unsecured debt into secured debt, as it entails using a valuable possession, like your house, as collateral for a new loan. The principle sum, meaning the total debt you owe at time of consolidation including interest, insurance, and fees, remains the same even if you lower your cost of credit (interest rate) through a new loan. With debt consolidation, if for any reason you miss a payment on the new loan, the creditor can foreclose, repossess, and even sell the collateral for satisfaction of the debt(s) that weren’t secured before consolidation. The drawbacks with debt consolidation include turning unsecured loans into secured loans, often allowing your home and other assets to be at risk if you can’t afford the required payment, and if the sum of the assets securing your consolidation loan are worth less than what is owe on the loan, you are still liable to pay the creditor the difference or may be issued a form 1099-C.

Create a Repayment Plan with Outside Help

Most people aren’t comfortable negotiating with their creditors or with collection agencies. A nonprofit credit or debt-counseling agency can help you create a plan to repay your debts and to improve your financial profile if you prefer not to negotiate on your own. The website of the United States Trustee at www.usdoj.gov/ust provides a list for local agencies in your area. If you click “Credit Counseling and Debtor Education,” you will be guided to a state-by-state list of agencies.

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