Alternatives bw“But I don’t want to file bankruptcy!” We often hear this when we suggest bankruptcy as a solution to financial distress. Though bankruptcy may be the best solution, in our experience, we always want to consider alternatives to bankruptcy that might be helpful in resolving financial problems. Of course, it’s important to have your financial situation evaluated by an experienced professional before making any decisions.

Read on to learn about several alternatives when dealing with debt issues.


Negotiate With Your Creditors

If you have some assets that you are willing to sell or funds you are willing to hand over to your creditor, you might be able to negotiate a reduction of your debt to that creditor. You may only be able to negotiate a reduced interest rate or more time before finance charges or late fees start accruing, but it might be enough to get you back on track. There is essentially no negotiation necessary when in a bankruptcy. You can propose to pay only what is affordable. And sometimes you pay nothing at all.


Negotiate With Your Mortgage Lender

If you are facing severe mortgage problems, you may be able to negotiate with the loss mitigation department of your mortgage company to reach a loan modification agreement that might be exactly what you need. If you are in a bankruptcy, we can help finalize a loan modification agreement that you might receive from your mortgage company while in the bankruptcy. And if you owe more than your house is worth, bankruptcy might offer additional money-saving solutions for you.


Debt Consolidation

This process allows individuals with multiple credit cards or loans to consolidate their debt into a single, and hopefully more manageable loan or payment. Individuals often choose this option when they are having trouble keeping up with multiple loan payments. A Chapter 13 bankruptcy will also consolidate debt into one payment; however, the Chapter 13 may also allow you to pay less than what you owe on certain types of debts—sometimes as low as 1% of your debt.


Debt Management or Settlement Plans

Debt management and debt settlement plans are alternatives to bankruptcy. Debt management plans can help you pay your creditors back over time—sometimes with a reduced interest rate. Debt settlement plans allow you an organized way to save money and propose settlements to your various creditors. Bankruptcy is an option when these alternatives are just not affordable.


Home Short Sale

If you are facing foreclosure of your home then you may benefit from a short sale of your property to alleviate yourself of the severe debt load of your home. Be sure to get advice from a professional, as this alternative may lead to tax or other unexpected liabilities. Bankruptcy allows you to surrender your house, eliminating the debt and the stress related to an attempted sale. Bankruptcy may also exempt you from the potential tax liability.


Do Nothing

Surprisingly, sometimes the best solution is taking no action at all. If you are living simply, with little or no income, no assets of value, and anticipate a similar lifestyle in the future, you may be “judgment proof”. This means that if anyone sues you and obtains a court judgment, they won’t be able to collect from you simply because you don’t have anything they can legally take. Except in unusual situations, you can’t be thrown in jail for not paying your debts. Nor can a creditor take essentials away from you, such as basic clothing, ordinary household furnishings, personal effects, food, or certain exempt income and public assistance benefits.


It is important to note that every debt situation is unique and while these alternatives may work for some people, they do not apply to everyone. If you have questions, please call the bankruptcy professionals of Chandler Pecoraro.

We can help you evaluate your bankruptcy options and alternatives.

You were the only lawyer who didn’t seem to be judging me. Thank you for your compassion!

- Willie J.

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