The Effectiveness of Different Bankruptcy Alternatives?
Gilbert Bankruptcy Attorneys Explain Some Debt Relief Alternatives To Bankruptcy
Bankruptcy is the most effective way to get debt relief for most people. Chapter 7 bankruptcy can completely discharge your unsecured debt, such as credit cards, medical bills, and personal loans. Chapter 13 bankruptcy can reorganize your debt under a more affordable monthly payment, and it can discharge some of your debt at the end of your repayment period. Both allow you to rehabilitate your credit and your finances more quickly than if you had continued to struggle with paying your debts and falling behind on payments or missing them.
Yet, despite the many benefits of bankruptcy, many people try to avoid it if they can. Some people think of it as the “nuclear” option when they don’t have any other choices and they don’t mind the fallout from their credit. But learning about the truths behind the myths can help you to understand that bankruptcy should be one of the first options you consider for maximum debt relief and faster financial recovery. Learning why alternatives to bankruptcy don’t typically work is one way to dispel those myths. Here’s what you need to know:
Negotiating with Creditors
You can attempt to negotiate with your creditors directly to get a better handle on your debt. You may attempt to negotiate by asking for a lower interest rate, asking for your account to be canceled and put on a payment plan so you can stop interest charges altogether, or offering a lump sum payment for your debt.
Chances are low that your credit card company is going to accept. The company’s goal is to get as much money from you as possible. It wants to collect on that interest, and it wants to get the full amount you owe. It knows that if it says no, you have few options other than to pay. Filing for bankruptcy is your option for getting free of that debt without having to pay any more and without having to worry about additional penalties.
Working with a Credit Counseling Agency
Credit counseling agencies essentially do the same work that you could do, trying to negotiate with your creditors. Sometimes, companies are a little more willing to work with them because they know that if you have taken the step of working with a credit counselor, things are getting dire. So they may be willing to negotiate since they know you may just default.
But again, greed is powerful. Many creditors will even reject attempts from credit counseling agencies because they may think that they can threaten you with legal action and get you to pay. Their goal is always to get as much money from you as they can.
Working with a credit counseling agency may help you learn how to better handle your finances so you don’t get into trouble with debt again, but that won’t help you with your current debt. Also, taking a credit counseling course is a requirement of filing for bankruptcy, so you can get this education while also getting guaranteed debt relief without bothering with the credit counseling agency.
Attempting a Debt Settlement
There are two types of debt settlement: One where you offer a lump sum to pay off your debt (usually a sum that’s lower than what you owe) and one where you offer to make payments on your debt over time but have some of it discharged at the end. The problem with this is that if you are struggling with debt, you likely don’t have a huge amount of money to offer a lump sum payment. The other problem is that your debtors are unlikely to accept these terms. Sometimes, if your debt has already been turned over to a debt collection agency, you may have success. That’s because these companies purchase your debt for pennies on the dollar, so even if you are offering to pay a lower amount, that company is likely still making money. Your original creditor will likely lose money, so they aren’t as likely to agree.
Chapter 13 bankruptcy allows you to get a debt settlement without the permission. The bankruptcy court looks at what you owe and determines what you can afford to pay. You get a monthly payment plan that you can afford, and at the end of the three- to five-year plan, some of your debt can be discharged.
Bankruptcy allows you to get the debt relief you need without having to ask your creditors for permission. You can get rid of some of your debt or get it down to a level you can more easily manage. Don’t waste your time with these so-called “alternatives.” Just talk to a bankruptcy attorney in Gilbert about fast and effective debt relief through bankruptcy.
Call Gilbert Bankruptcy Lawyers today to talk with a bankruptcy attorney about your options. We represent clients in Chapter 7 bankruptcy and Chapter 13 bankruptcy, and we can help you determine which will be right for you. We’ll help you understand how each can affect your assets or maximize your debt relief. Call us today to schedule a consultation with a Gilbert bankruptcy attorney to learn more.