Are there alternatives to bankruptcy?

By Karen Wilde 

Filing for Chapter 13 or Chapter 7 bankruptcy can be a good option for those struggling with debt; however, some of the alternatives to bankruptcy could lead to an overall better solution to financial problems.

In many cases, people claim bankruptcy in order to stop forms of harassment from creditors. If this is the case, people should take full advantage the local, state, and federal laws in order to stop harassment, rather than go through with the bankruptcy. Because bankruptcy can stay on your credit report for seven years, exploring all available options and reasons for filing is important. 

Can the issue be worked out?
 
From a business standpoint, creditors would much rather work out issues than have a client file for bankruptcy. While many companies will sell debt to collectors, it is much more profitable to the company to have the debt paid by the consumer. With this in mind, it is a wise idea to contact the companies to which the debt is owed. Often times, the company will work with the income restrictions the consumer has in order to reach an agreement. 

Credit counseling agencies
 
Getting help from a credit agency is a wise idea for those who do not possess the negotiating skills to work things out with individual companies. The agency can look at all of the companies money is owed to and help the consumer consolidate and work out payment plans. There are many nonprofit credit and debt counseling services that charge a small fee, or no fee at all. Make sure to choose a credit counseling agency that has been approvedby the United States Trustee Program. The U.S. Trustee program has a useful search engine that allows visitors to find approved credit counseling agencies by state. 

Available repayment plans
 
Many debt counseling agencies will help the consumer to create a payment plan that is designed to pay off all of the creditors money is owed to. This makes it easier to pay the creditors back over time, rather than all at once. According to the Better Business Bureau,a debt repayment plan is “a creditor-approved arrangement that allows you to repay your unsecured debts at reduced interest rates”. The arrangement, which will also reduce your late fees and penalties, will be negotiated by the credit counseling agency. Those who use debt repayment schedules will send their payments directly to the credit counseling agency, rather than to the creditors or companies. 
  
Consequences of not taking action
 
Whether you decide to file for bankruptcy, or look for help from a credit counseling agency, ignoring the debt completely can hurt any consumer in the long run when it comes time to buy a new car or home when it affects the consumer’s credit record. After filing bankruptcy or consulting with a credit counseling agency, make every effort to refine your spending habits. Take finance classes, speak with a finance consultant, limit your credit lines, and set up a savings account. Doing so will help you avoid debt problems in the future.

Karen Wilde has worked with many bankruptcy and foreclosure cases, and knows how important it is to look for bankruptcy alternatives. Finding an experienced bankruptcy attorney can help you find what solution works best for you.