When every other phone call you receive is from a creditor of one kind or another then the first thought that might pop into your head is to file for Chapter 7 or Chapter 13 bankruptcy, depending on your own individual circumstances. Although declaring yourself bankrupt does offer you a very clear plan for dealing with your debts, it\’s a good idea to stop and think before you immediately jump over the final hurdle and head straight for the bankruptcy finish line.
You see there are several alternatives to declaring bankruptcy – each with their own advantages and disadvantages. We\’re going to take a quick look here at what alternatives are available to you.
Reduce and Grow
If you find yourself struggling financially you do always have the option of simply reducing your outgoings and attempting to grow your income. This will involve trimming your personal expenses to pretty much zero and finding another source of income, such as a second job for example. The biggest advantage to taking care of your debts in this way is that no mention of bankruptcy ever appears on your credit report, plus you can also get some protection from creditors via the FDCPA (Fair Debt Collection Practices Act).
Negotiate Directly
There are a lot of people with large amounts of debt in the United States right now and during these low points in the economy any creditor with experience of a recession knows that sometimes getting something from a debtor is better than getting nothing at all – or a fraction of that via the protection offered them by bankruptcy proceedings. If you\’re in a position where you have assets you can sell, parlay towards your debt or simply give your creditor as part payment, then this one route you can take. Basically your creditors will be just as willing to sort this out with you directly as through the courts – including taking part payment as settlement. Obviously get legal/financial advice before undertaking a private negotiation with your creditors. Again the biggest advantage here is that your credit rating stays more intact, but the disadvantage is that your creditors could simply change their mind and you\’d have no legal protection at all in this situation.
Debt Counseling
Working with a debt counselor means that they come up with a repayment plan for your creditors which ensures they get paid back over roughly the time scale as with a Chapter 13 filing. The biggest advantage of dealing with your debts this way is again that the word \”bankruptcy\” never appears on your credit report. Which way you decide to deal with your debts is up to you, and it\’s important that you realize there are alternatives to declaring yourself bankrupt. That being said filing for Chapter 7 or Chapter 11 bankruptcy offers a level of legal protection which most people with financial issues crave. Consulting with a bankruptcy attorney is one very effective way of finding out what path will suit your personal circumstances best.